From penalising Australia’s remote, penguin-inhabited islands to targeting India’s IT, pharmaceutical, and automobile exports, Trump’s sweeping trade measures are less about economics and more a strategy to reshape global geopolitics

One man has rewritten world trade rules. Reciprocity is the name of the game. Difficult to find fault with his arguments. What you are doing to America, its President, Donald Trump, has now decided to do to you. Cold War having gone, the scope for others to play off one superpower against the other is not available and challenging times lie ahead for world leaders and diplomats.

The World Trade Organisation (WTO) better self-deport itself from the scene!  In a world in turmoil, unilateralism replaces multilateralism. India certainly is in a quagmire, as all WTO principles and protection walls are being felled with 26 per cent tariff — 50 per cent of 52 per cent allegedly being charged by India.

The reciprocal tariff is in addition to the existing one. Automobiles or parts have a 25 per cent tariff, and another 26 per cent is to be levied. It could hit the country’s major export pillar — the IT services.

But that is not the peak of absurdity. In his absurd passion for world tariffs, fuelled by zeal for bulldozing world order, Trump has imposed a 10 per cent tariff on the uninhabited, volcanic Heard and McDonald Islands — one of the remotest places on Earth, home to penguins, near Antarctica — an external territory of Australia, reached by a two-week boat ride from Perth.

The last visit to this man-forsaken place by people is believed to be nearly 10 years ago. But data show that the US had imports of $15,000 to $325,000 in machinery a year during the past five years! Such tariff-hit territories include the Cocos (Keeling) Islands, Christmas Island, and Norfolk Island. Norfolk, a 2,000-inhabited island, gets a 29 per cent tariff for its tiny footwear exports of $655,000 to the US.

The islands are part of Australia. Leading Australian Prime Minister Anthony Albanese reacted on April 3 — a day after Trumpelling moves roiling the world — “Nowhere on Earth is safe.” India thus is not in an unviable position. At best, it can wonder whether it would remain fascinated with the New World as the order collapses. Would it look for new trade avenues?

It is trying, but has not yet found a lucrative market. Even as the US sinks, it remains a “superpower”. It knows that the US system itself has gone beyond sane moves — forcing India to extend several concessions, even in pro-Trump or better say, Joe Biden — days, on agriculture and other products.

The more it yields, the more it is being subjected to shed.India needs a charter for negotiating world chaos. It was once at the forefront of establishing multilateralism since its glorious Non-Aligned Movement.

It has lost the edge during the 30 years of globalisation, getting closer to the US — perhaps fascinated by its economic power. And now, as Trump announces April 2 as Liberation Day, it is looking for new avenues.The new tariffs include a universal 10 per cent duty on all imports into the US starting from April 5, with an additional 16 per cent to be applied from April 10. The reciprocal tariff imposed is a big blow to India’s exports, affecting multiple industries. Key sectors could be hit. Ranging from small to big, company revenues are likely to fall.

$23 bn Concessions

India has a trade surplus of $46 billion. Hit by the big brother, it may slash import duties worth $23 billion on US goods, including gems, jewellery, pharmaceuticals, and auto parts. Would that soften the blow? India’s top exports to the US are engineering goods — $17.6 billion (bn) in 2023–24 and $18.6 bn in 2022–23; electronic goods — $10.1 bn and $5.7 bn; gems and jewellery — $9.9 bn and $12.5 bn; pharmaceuticals — $8.7 bn and $7.5 bn; textiles — $9.2 bn and $9.7 bn; and petroleum products — $10.10 bn and $5.8 bn.

The imports are: $5.2 bn petroleum oil in 2023–24 and $10 bn in 2022–23; petroleum gases — $1.2 bn and $1.9 bn; petroleum coke — $1.54 bn and $1.9 bn; aircraft — $2.09 bn and $2.11 bn; and nuts — $1.02 bn and $1.11 bn.The new tariffs are likely to have short-term and long-term implications for the overall economy, trade relations, currency markets, investments in businesses, and stock markets.

There is a view that compared to other countries like China (54 per cent tariff), Vietnam (46 per cent), Thailand (36 per cent), Taiwan and Indonesia (32 per cent each), the impact is less on India. The reality may be harsher and the industry would have to make wider adjustments — do cost-cutting and reduce product prices.

The tariffs are likely to hit autos, pharmaceuticals, and IT. Additional duties may hit hard automobiles and auto parts, cars, and light trucks.Tata Motors — the parent company of Jaguar Land Rover, which exports to the US — saw its shares fall 5 per cent following the tariff announcement, while Sona Comstar, an Indian global automotive systems manufacturer, declined 4 per cent.

The pharmaceutical sector may also come under pressure. Although specific tariff rates are yet to be detailed, the US remains a key market for Indian drug exports, and any hike in duties could impact revenue. However, pharma products have reportedly been exempted from the latest round of US reciprocal tariffs.

Steel, Farms, IT Hit

Sectors such as steel and agriculture are likely to be hit, with the impact first reflected in the stock market. Indian equities may come under pressure — particularly export-driven sectors like pharmaceuticals and IT — amid fears of retaliation. It could disrupt global supply chains.

Rising trade tensions may weigh on the rupee and dampen FDI, though domestic stimulus could cushion some of the blow. Japan’s auto sector may face export hurdles, pressuring the Nikkei. Globally, risk-off sentiment could boost the US dollar and Treasuries. Investors should closely track retaliatory moves and sector-specific vulnerabilities.India’s diplomacy will be changing on the pattern summed up best by Minister for External Affairs, who in 2022 said, “This is a time for us to engage America, manage China, cultivate Europe, reassure Russia, bring Japan into play, draw neighbours in, extend the neighbourhood and expand traditional constituencies of support.” China may emerge as a friend, and the US may not be a foe in the new order as trade diversifies.Being optimistic is a natural human phenomenon.

Every Indian expert, including former RBI Governor Raghuram Rajan, says the country would emerge stronger, as it has done with each crisis. There are others who are critical of the accommodative Indian approach. Many wanted the country to retaliate like China, a prime Trump target. China announced imposition of a 34 per cent tax on all US imports next week, part of a flurry of retaliatory measures.

Trump threatens an additional 50 per cent tariff on China and a termination of negotiations if Beijing does not withdraw its retaliatory measures. But China has called for global digital Renminbi (Chinese Yuan) settlements — making the US fear of de-dollarisation sharper.

Trump has already expressed disdain over the BRICS bid to move away from dollars. He forgets that many nations, including India, have taken to trade in gold, as till three months ago it cost less than the dollar.

With central banks of many countries rushing for gold purchases, gold prices shot up by 15 per cent. Since the “Liberation Day” US announcement, gold slipped 2.7 per cent or $3,000 an ounce. It is predicted to fall further. Stock markets across the globe — the US, Asia, and Europe — are crashing since the April 2 shockwaves.

Hong Kong’s stock market suffered its steepest single-day decline in nearly three decades amid a wave of panic selling. Hong Kong’s Hang Seng Index plummeted 13 per cent, while Japan’s Nikkei fell 8.6 per cent, and Shanghai’s Composite dropped 7 per cent. European equity markets are experiencing their worst session since the outbreak of the COVID-19 pandemic in March 2020, as investors continue to flee from risky assets. European trade officials are meeting in Luxembourg to discuss tariffs, with Germany calling it “nonsense”.

Indian companies are witnessing the sharpest wave of earnings downgrades. Foreign portfolio exits are causing severe concern.The Trump trade war sees everyone losing.

The internal US financial crisis has led to severe protests in 50 American states, as they fear harsh economic conditions with prices zooming.It reminds one of the 1930s when the Great Depression in the US gradually escalated to World War II. Could it happen again?

A pessimistic trading nation — tiny Singapore , at least has expressed the apprehension. Though so far nobody has said the tariff barrier could break into a global armed conflict, the trade war is destabilising the global system — more likely to be unfolded in the coming weeks and reflect how India fares amid the glut of unwanted American imports.

(The writer is a veteran journalist; Views are personal)