Tariff threats don’t work, take it easy Don!

January 20, 2025, is the day world leaders are keenly waiting for with their heartbeats seeing a heightened rhythm as the day approaches. The ‘Don’ (Donald Trump) is set to assume Presidency of the USA for the second time. The worry is not about him occupying the Oval Office, but more about his views on global trade. The Don minces no words in his ‘terror’ like threat to trade tariffs. It appears that he means business too. So, leaders particularly of India, Brazil, China and the 22 nation-European Union are keeping their fingers crossed.

Trump's recent threats to impose trade tariffs have sent ripples of concern through global markets, particularly affecting major economies like India, Brazil, China, and the European Union. His aggressive stance on trade, characterised by the potential imposition of up to 60% to 100% tariffs on BRICS nations and the EU, has raised alarm about the stability of international trade relations. For India, the threat of tariffs is particularly worrisome given its significant trade relationship with the US. The imposition of high tariffs could severely impact key sectors such as pharmaceuticals, textiles, and IT services, making Indian exports less competitive in the US market.

This could lead to a slowdown in economic growth and increased uncertainty for businesses relying on the American market. Brazil, another major player in the BRICS alliance, faces similar concerns. The country’s agricultural exports, which form a substantial part of its trade with the US, could be hit hard by the proposed tariffs. This would not only affect Brazil's economy but also disrupt global agricultural supply chains. China, already embroiled in a trade war with the US during Trump's previous term, is once again in the crosshairs. The threat of additional tariffs could exacerbate existing tensions and lead to further economic decoupling between the two superpowers. This would have significant implications for global supply chains, particularly in technology and manufacturing sectors. The Don is also flexing his muscles with the European Union. The EU business, with its complex and deeply integrated trade relationship with the US, also stands to suffer on account of this.

The imposition of tariffs could disrupt the flow of goods and services, leading to economic instability within the bloc. The EU has already expressed its readiness to negotiate, but the uncertainty surrounding Trump's trade policies poses a significant challenge. On Friday, President-elect Donald Trump added the 27 countries that make up the European Union to the list of trade partners he's threatening with tariffs — unless the group takes steps to import more US goods, “Otherwise, it’s tariffs all the way!!!” This threat appears real and worrisome not only for the EU but also for the rest of the world. EU Commission spokesman Olof Gill in reaction to Trump's post said the EU is already “committed to phasing out energy imports from Russia and diversifying our sources of supply.” Also, when Trump threatened Canada and Mexico with 25% tariffs in November, the leaders of both countries spoke with him to try and resolve any tensions. An act of seeking ‘Trade Peace’.

About India and Brazil, Trump said they were among countries that impose high tariffs on certain US products and he will reciprocate that with even higher tariffs against these countries. India exercising caution has not reacted with a harsh comment. It cautiously noted that “imposing reciprocal duties violates global trade rules but one has to follow a "wait and watch" approach. Perhaps, it’s a more mature approach, India is adopting. New Delhi believes that Trump’s intent is that reciprocity will matter in future. Trump's tariff threats have no doubt created a climate of uncertainty and concern among major global economies. The Don should realise that today threats don’t work. So live and let live!