TARIFF WAR Explained

Context:

US President Donald Trump has announced sweeping tariffs on goods imported from the rest of the world.
Trump claims that a 10% tariff on all nations and much higher rates of up to 50% on individual countries will boost the US economy and protect jobs.

trump tariffs stoke worry in trade circles

What are tariffs?

A tariff is a duty (a tax) imposed by a national government, customs territory, or supranational union on imports (or, exceptionally, exports) of goods.
A tariff is a type of protectionist trade policy because it increases the cost for foreign firms to sell in a country.

Enlist different types of tariffs?

Tariffs are taxes imposed on goods and services that are traded internationally.
Tariffs can be applied in different ways, and they can have different effects on international trade.

Tariff	Description
Ad Valorem Tariffs	Ad valorem tariffs are levied as a percentage of the value of the imported goods. For example, if a country imposes a 10% ad valorem tariff on cars, and a car is imported with a value of $10,000, the tariff would be $1,000. Ad valorem tariffs are the most common type of tariff and are used by many countries to protect their domestic industries.
Specific Tariffs	Specific tariffs are levied as a fixed dollar amount per unit of the imported goods. For example, if a country imposes a specific tariff of $50 per ton of steel imported, and 10 tons of steel are imported, the tariff would be $500. Specific tariffs are less common than ad valorem tariffs but are used in some industries where the value of the goods is difficult to determine.
Compound Tariffs	Compound tariffs are a combination of ad valorem and specific tariffs. For example, a country may impose a tariff of 10% of the value of the imported goods plus $50 per unit. Compound tariffs are used to protect domestic industries while also generating revenue for the government.
Tariff-Rate Quotas	Tariff-rate quotas are used to limit the amount of a particular product that can be imported at a lower tariff rate. Once the quota is reached, a higher tariff rate is applied. For example, a country may allow 100,000 tons of sugar to be imported at a lower tariff rate, but any sugar imported above that amount would be subject to a higher tariff rate. Tariff-rate quotas are used to protect domestic industries while still allowing some imports.
Export Tariffs	Export tariffs are taxes imposed on goods that are exported from a country. These tariffs are used to generate revenue for the government and to discourage the export of certain goods. For example, a country may impose an export tariff on raw materials to encourage the processing of those materials within the country.

Who uses tariffs?

Almost every country imposes some tariffs.
In general, wealthy countries maintain low tariffs compared to developing countries.
Developing countries impose more tariffs because they have more fragile industries that they wish to protect, or they might have fewer sources of government revenue.
The United States, for instance, maintained high tariffs for decades, until income taxes supplanted tariffs as the most important source of revenue in the 1930s.
After World War II, tariffs continued to decline as the United States emphasized trade expansion as a central plank of its global strategy.

How does a tariff work?

Why do governments impose tariffs?

Reasons	Analysis
Raising Revenue	Tariffs can be used to raise revenues for governments. This kind of tariff is called a revenue tariff and is not designed to restrict imports. For instance, in 2018 and 2019, President Donald Trump and his administration imposed tariffs on many items to rebalance the trade deficit. In the fiscal year 2018, customs duties received were $41.6 billion. In fiscal year 2019, duties received were $71.9 billion.
Protecting Domestic Industries	Governments can use tariffs to benefit particular industries, often doing so to protect companies and jobs. For example, in April 2018, President Donald Trump imposed a 25% ad valorem tariff on steel articles from all countries except Canada and Mexico. In March 2022, President Joe Biden replaced the tariff on steel products from the United Kingdom with a tariff-rate quota of 500,000 metric tons, and reached quota deals with several other countries. This proclamation reopened the trade of specific items with the U.K. while taking measures to protect domestic U.S. steel manufacturing and production jobs.
Protecting Domestic Consumers	By making foreign-produced goods more expensive, tariffs can make domestically produced alternatives seem more attractive. Some products made in countries with fewer regulations can harm consumers, such as a product coated in lead-based paint. Tariffs can make these products so expensive that consumers won't buy them. President Donald Trump placed 25% tariffs on imports from Canada and Mexico and 10% tariffs on imports from China. The rationale behind these tariffs was to force these countries to cooperate with the U.S. to stem the flow of illegal immigrants and drugs like fentanyl from entering the U.S., as well as to boost domestic manufacturing and raise revenues.
Protecting National Interests	Tariffs can also be used as an extension of foreign policy as their imposition on a trading partner's main exports may be used to exert economic leverage. For example, when Russia invaded Ukraine, much of the world protested by boycotting Russian goods or imposing sanctions. In April 2022, President Joe Biden suspended normal trade with Russia.

What are Tariff wars?

Tariff wars refer to the imposition of tariffs or duties on imported goods by one country, leading to retaliatory measures by trading partners.

Enlist the major events of tariff war?

Events	Analysis
SmootHawley Tariff Act	The Smoot-Hawley Tariff Act of 1930, which raised tariffs on thousands of goods, is often cited as an example of the negative effects of protectionism and tariff wars. It exacerbated the Great Depression by reducing international trade and worsening economic conditions globally.
US-China Trade War	A key example of reciprocal tariffs happened during the U.S.-China trade war that intensified in 2018. The U.S. placed tariffs on many Chinese products, claiming unfair trade practices and intellectual property theft. In response, China imposed tariffs on American goods, including agricultural items like soybeans and pork. This cycle of tariffs increased costs for consumers and businesses in both nations.
European Union tariffs:	The European Union has also been involved in tariff wars, particularly with the US over issues such as steel and aluminum tariffs and digital services taxes. In 2018, after the U.S. introduced tariffs on steel and aluminum, the EU retaliated with tariffs on American goods, targeting items such as bourbon whiskey, motorcycles, and agricultural products.
Canada and United States	The Canada-U.S. relationship also saw reciprocal tariffs. After the U.S. imposed tariffs on Canadian steel and aluminum in 2018, Canada responded with tariffs on various U.S. products, including ketchup, whiskey, and other consumer goods. This example showed that even close allies can engage in reciprocal tariff actions when faced with unilateral trade measures.
India’s Tariffs on US Products	India has taken reciprocal tariff actions against the United States. After the US raised tariffs on steel and aluminum imports from India, India responded by increasing tariffs on several American goods, including almonds, apples, and some electronics. This shows how developing countries may react to protectionist policies from larger nations by implementing their own tariffs.

Why is Trump using tariffs?

For decades, Trump has argued that the US should use tariffs to boost its economy.
Trump wants to reduce the gap between the value of goods the US buys from other countries and the value of those it sells to them.
He argues that America has been taken advantage of by "cheaters" and "pillaged" by foreigners.
Trump has said tariffs will create more factory jobs, shrink the federal deficit, lower food prices and allow the government to subsidize childcare.
"Tariffs are the greatest thing ever invented,'' Trump said at a rally in Flint, Michigan, during his presidential campaign.

What are Trump's 'reciprocal tariffs'?

Reciprocal tariffs are import duties imposed by a country in response to the tariffs placed on its exports by another country.
They are designed to create a level playing field in international trade by ensuring that both trading partners impose similar tariff rates on each other’s goods.

10.

Mention about the tariff announced by Trump?

11.

How were Donald Trump's tariffs calculated?

US President Donald Trump has imposed a 10% tariff on goods from most countries being imported into the US, with even higher rates for what he calls the "worst offenders".
When Trump presented a giant cardboard chart detailing the tariffs in the White House Rose Garden it was initially assumed that the charges were based on a combination of existing tariffs and other trade barriers (like regulations).
But later, the White House published what might look like a complicated mathematical formula.

But if we unpick the formula above it boils down to simple maths:
Take the trade deficit for the US in goods with a particular country, divide that by the total goods imports from that country and then divide that number by two.
For example, the US buys more goods from China than it sells to them - there is a goods deficit of $295bn.
The total amount of goods it buys from China is $440bn.
Dividing 295 by 440 gets you to 67% and you divide that by two and round up.
Therefore the tariff imposed on China is 34%.

12.

What are the features of reciprocal tariffs?

Features	Analysis
Balancing Trade Relationships	Reciprocal tariffs aim to promote fair trade practices by ensuring that countries do not face unfair advantages or disadvantages in terms of tariffs applied to their goods in different markets.
Negotiation Tool	Reciprocal tariffs can be used as a negotiating tool in trade disputes or to incentivize other countries to reduce or eliminate tariffs on the country's exports.
Protect Domestic Industries	Reciprocal tariffs can provide protection to domestic industries by making imported goods less competitive in the local market.
Countermeasures Against Unfair Practices	Reciprocal tariffs target protectionist policies like excessive import taxes, subsidies, or trade restrictions imposed by other countries.
Trade wars	The imposition of reciprocal tariffs can strain diplomatic relations between countries, potentially leading to trade wars or retaliatory measures.

13.

What is the history of reciprocal tariffs?

The concept of reciprocal tariff policies started in the 19th century when countries began using tariffs to shield their local industries and boost economic development.
Reciprocal tariffs, or reciprocal trade agreements, involve nations agreeing to lower or remove tariffs on goods in a mutual way.
A notable early example is the Cobden-Chevalier Treaty of 1860 between Britain and France, which significantly cut tariffs between the two nations, enhancing trade and economic collaboration.
In the early 20th century, reciprocal tariff policies became more prominent with the Smoot-Hawley Tariff Act in the United States in 1930.
This act raised tariffs on many imported goods, prompting other countries to retaliate with their own tariffs, worsening the Great Depression.
After World War II, reciprocal tariff policies played a crucial role in international trade talks.
The General Agreement on Tariffs and Trade (GATT) was created in 1947 to lower tariffs and encourage free trade through reciprocal agreements.
Reciprocal tariff policies have historically been a means for countries to defend their local industries, stimulate economic growth, and negotiate trade deals.
While they can be useful for these purposes, they also risk causing trade conflicts and obstructing global economic cooperation.

14.

Which countries have the highest trade deficits?

The US has the largest trade deficit in the world.
According to data from 2023, the US imported $1.1 trillion more than it exported in that year.
The US trade deficit has been rising continuously since 2019, and has now been at more than $1 trillion for four years in a row.
India and the United Kingdom follow, each exceeding $230 billion in trade deficits, reflecting high import reliance.

15.

With which countries does the US have the largest trade deficit?

In 2024, the US had a trade deficit with 92 countries and a trade surplus with 111 countries.
The US’s large trade deficit is highest with three major economic partners – China, Mexico and Vietnam.
In 2024, the US-China deficit was $295bn, the US-Mexico deficit at $172bn and the US-Vietnam deficit at $123bn.

us runs trade deficits with most countries

16.

Which countries have the highest and lowest tariffs?

where global tariffs are highest and lowest

17.

What are the implications of tariffs?

Implications	Analysis
Disruption of international trade flows	Tariff wars often lead to a decrease in imports and exports between countries, disrupting established supply chains and affecting businesses that rely on global trade.
Increase in prices	Tariffs can lead to higher prices for imported goods, impacting consumers who may have to pay more for products they rely on.
Economic uncertainty	Tariff wars can create uncertainty in the global economy, making businesses hesitant to invest or expand, which can negatively impact economic growth.
Retaliatory measures	Tariff wars can escalate as countries retaliate with their own tariffs, leading to a cycle of increasing trade barriers and tensions.

18.

What will be the impact of tariffs on GDP?

The OECD published its latest economic outlook, downgrading its global growth projections for 2025 and 2026 in light of various political and economic uncertainties.
Compared to its last outlook, published in December 2024, the OECD revised its global GDP growth projection for 2025 from 3.3 percent to 3.1 percent and its 2026 estimate from 3.3 percent to 3.0 percent.

19.

How tariff impacts the supply chain?

Tariffs impact the supply chain in a multitude of ways, influencing everything from costs and pricing to sourcing and inventory strategies.
While businesses can adapt through diversification, nearshoring, and strategic stockpiling, they must also deal with increased complexity and uncertainty.

20.

How does the Trump tariff impact the global stock market?

Markets across the globe plunged into chaos on April 7,2025 (Monday) as Donald Trump's sweeping tariffs sent shockwaves from Wall Street to Asia.
With no signs of backing down, US President Donald Trump doubled down on his aggressive trade stance, demanding that other nations "pay a lot of money" to lift duties as high as 50%.
Asian markets have been hit particularly hard, with markets in Japan and Taiwan hitting circuit breakers for the first time since March 2020.
In Tokyo, the Nikkei 225 nosedived to its lowest level in over 18 months, with banks shedding almost a quarter of their market cap in just three sessions.
India's Dalal Street fared no better, with the Sensex and Nifty crashing more than 5% in pre-open trade.

from fever to freefall-us markets in meltdown mode

21.

What happened the last time the US imposed tariffs on this scale?

The last time the US imposed tariffs similar to those issued by Trump was at the outset of the Great Depression.
The Smoot-Hawley tariffs were passed in 1930 against the advice of many economists.
They raised the average tariff by 20 percent.
The goal was to protect American farmers and businesses that had ramped up production during World War I, only to see prices collapse when European manufacturing ramped back up thereafter.
However, the tariffs ended up triggering retaliatory tariffs from European trading partners, causing international trade to decrease significantly.

Between the United States and Europe alone, trade fell by about two-thirds between 1929 and 1932, deepening the depression.
The tariffs were ultimately repealed in 1934.
But they had more lasting geopolitical impacts as some historians speculate that the resulting economic fallout globally helped contribute to the rise of Adolf Hitler in Germany.

market crashes caused by smoot-hawley tariff news

22.

Do Americans support Trump’s tariff move?

On April 2, which Donald Trump dubbed "Liberation Day," the president announced extensive new tariffs.
Trump's announcement sent the markets into turmoil with Wall Street recording its worst day since 2020, when COVID-19 was in full swing.
A Wall Street Journal poll conducted by Trump’s campaign pollster, Tony Fabrizio, showed a downturn in Trump’s approval rating.
Trump’s approval ratings have fallen to their lowest point since he assumed office amid the tariff furor.
While Trump’s immigration policies remain relatively popular, buoying his overall approval ratings, that’s not the case when it comes to his economic policies.
Polls conducted over the last month indicate that between 37 and 45 percent of Americans approve of Trump’s performance on the economy.
51 percent of Americans said they back the statement that "Republicans are crashing the American economy in real time and driving us into recession. This is not liberation day, it's recession day."
A majority of Americans said in a March 27 CBS News/YouGov poll that Trump is focusing too much on tariffs and not enough on reducing prices.
A separate YouGov poll conducted shortly after Trump’s tariff announcement found that a majority of Americans disapproved of the tariffs, 40 percent strongly so.

23.

Why did Donald Trump spare Russia, North Korea from massive Liberation Day tariffs?

Russia and North Korea were also not on the list of countries facing additional tariffs, and exactly why is a bit of a mystery.
The White House has reportedly argued that they are “already facing extremely high tariffs, and our previously imposed sanctions preclude any meaningful trade with these countries.”
However, other countries facing significant US sanctions, including Venezuela, were hit with additional tariffs.
Also, the US still trades significantly more with Russia than with other countries that were not spared, some of which are remote islands.
After Russia’s 2021 invasion of Ukraine, the US imposed economic sanctions on Russia that caused trade between the two countries to fall from about $35 billion to $3.5 billion last year.
Russia is currently in talks to lift those sanctions as part of an agreement to end the war in Ukraine.

24.

What will be the impact of tariffs on the USA?

As per a report by The Tax Foundation, tariff actions currently in effect and announced by the Trump administration could lower U.S. GDP by up to 0.65 percent.
All these tariff actions combined could also lower U.S. full-time employment by almost 600,000.
For comparison, The Tax Foundation estimates that 2018-2019 trade war tariffs, mostly with China, lowered U.S. GDP by just 0.25 percent and cost around 170,000 full-time jobs (including retaliatory action).
On the other side of the equation stands an increase of government income of between $229-263 billion from tariffs in 2025 (and slightly more each year after that if they stayed in place).
However, compared to all of government revenue, this number would still be in the single digit percent share of the budget.

effects of tariffs on us economy pile up

25.

What can be the potential impact of Trump's Tariffs on the Indian Economy?

The recent imposition of a 26% reciprocal tariff by the United States on Indian imports coupled with the ongoing US-China trade tensions, affects various sectors of the Indian Economy.

trade balance in 2025 is from april 2024 to november 2024

Sectors	Analysis
Trade and Exports	India, with a sizable export sector, is vulnerable to shifts in global demand and supply chains. Reduced Global Demand and Export Vulnerability: One of the most direct consequences of escalating trade wars is the slowdown in global economic growth. This reduction in demand translates into falling orders for Indian exports, particularly in labour-intensive and value-added sectors such as:Textiles and apparel,Gems and jewellery,IT services,Auto components. With global consumption cooling and protectionism rising, Indian exporters are likely to face lower margins, order cancellations, and increased competition in international markets. Trade Diversion: Limited and Conditional Gains: While there is optimism that India might benefit from trade diversion—substituting Chinese goods in the U.S. and other western markets. The actual gains are limited in scale and scope due to capacity constraints and supply chain inefficiencies. Short-term in nature, as companies may eventually realign supply chains only if India ensures policy consistency, faster logistics, and quality manufacturing. Tempered by the fact that India too is now subject to a significant 26% tariff rate, limiting any pricing advantage it might gain over China. Export Uncertainty and Long-term Strategic Concerns: Prolonged global trade instability erodes business confidence, especially among small and medium exporters. This will lead to hesitation in signing long-term contracts, delays in investment in exportoriented infrastructure and disruptions in planning and procurement. Exporters find it difficult to price competitively when future tariff regimes are uncertain, discouraging long-term engagement with global partners. Sector-Specific Impacts-Pharma, Textiles & Jewellery: Pharmaceuticals: Although globally competitive, India's pharma sector depends heavily on Chinese APIs (70% import share). Supply chain disruptions can lead to production delays and higher costs, affecting export competitiveness and regulatory compliance. Textiles and Apparel: A highly labour-intensive sector, this is particularly exposed to both tariff increases and shrinking global demand, especially in the U.S. market. Gems and Jewellery: India’s prominent position in the global diamond and jewellery trade is threatened by increased duties and weakening global luxury demand.
Supply Chain Disruptions	India’s manufacturing sector is highly dependent on imports of intermediate goods and components, particularly from China. Electronics and Consumer Goods: According to a LiveMint report, a significant portion of components in smartphones, laptops, and appliances sold in India come from China. Tariffs disrupt these supply chains, increasing costs and reducing availability. Pharmaceuticals: India imports nearly 70% of its Active Pharmaceutical Ingredients (APIs) from China. Any disruption here can affect drug production, pricing, and availability domestically. Auto Components: The automotive industry may experience supply chain disruptions and increased costs, impacting both exports and domestic production. Manufacturing Competitiveness: Higher input costs and production delays due to disrupted supply chains reduces the global competitiveness of Indian manufacturers.
Financial Markets volatility	Equity Markets: Indian equities have faced sharp sell-offs, particularly in sectors exposed to global trade and exports. IT, pharmaceuticals, textiles, gems & jewellery, which face weakening global demand and reduced price competitiveness due to U.S. tariffs. Cyclical sectors like automobiles and metals, which suffer from supply chain disruptions and rising input costs. The benchmark indices, Sensex and Nifty, have seen steep corrections—one of the worst in recent months—mirroring investor anxiety and global risk-off sentiment. Defensive sectors such as FMCG and utilities have offered relative stability, acting as safe havens within the equity space. Debt Markets: While foreign outflows from Indian debt instruments have pushed bond yields higher, leading to rising borrowing costs, the overall domestic debt market remains resilient, supported by the RBI’s accommodative stance. The central bank has undertaken rate cuts and infused liquidity to cushion the economy from global shocks. Falling interest rates have benefitted debt mutual funds, providing capital gains as bond prices rise. However, sustained currency volatility, volatile oil prices, and supply chain-driven inflation may challenge this stability over time. Surge in Precious Metals: Global uncertainty has led to a sharp rise in gold and silver prices, with gold hitting lifetime highs post-tariff announcements. These gains are driven by:Risk-averse investor sentiment, prompting movement away from equities to safehaven assets. Dollar and inflation volatility, as tariff wars disrupt trade flows and monetary expectations. In India, where gold is both an investment and a cultural commodity, this surge has dual implications—boosting portfolio hedges but also increasing import bills.
Macroeconomic Implications	GDP Growth: Government estimates suggest a limited direct impact on GDP—approximately 0.1% decline—owing to India’s strong domestic demand base. Economists and market analysts warn of broader repercussions. Slower global trade and weaker external demand may affect export-oriented sectors. Supply chain disruptions and reduced investment confidence could dampen private sector activity. Potential job losses in affected sectors like textiles, gems & jewellery, and manufacturing could further reduce consumption. Inflation: Tariff-related disruptions are expected to exert inflationary pressure, especially through:Imported inflation caused by a weaker rupee and higher global input prices. Costlier raw materials and intermediate goods, particularly in industries reliant on Chinese imports (e.g., electronics, pharmaceuticals, auto components). Manufacturers pass on higher costs to consumers, leading to an increase in retail inflation. Consumer durables such as smartphones, home appliances, and electronics are already seeing price hikes, directly impacting household budgets. Currency Volatility: The Indian Rupee has become increasingly vulnerable to depreciation amid global risk aversion triggered by trade tensions. Foreign portfolio investors (FPIs) are rebalancing away from emerging markets, creating capital outflows. A weaker rupee raises the cost of imports, worsens the current account deficit, and increases the burden of external debt servicing. Currency instability also undermines investor confidence, deterring Foreign Direct Investment (FDI) — particularly in exportlinked and tariff-sensitive sectors.
Employment crisis	Export Oriented Jobs: Textiles, garments, gems & jewellery, IT services, and pharmaceuticals are major export-driven industries employing millions of workers, especially in labour-intensive roles. The imposition of tariffs by the US and the subsequent global demand slowdown could lead to lower export volumes, profit margin compression and reduced production cycles or plant shutdowns. Ultimately resulting in layoffs, hiring freezes, or wage cuts. Manufacturing Slowdown and resulting job loss: Tariff-induced disruptions in global supply chains could lead to production delays or halts,increased costs for manufacturers and reduced factory activity. This threatens jobs in both formal sector units and MSMEs that operate on tight margins and low inventories Informal Sector Vulnerability: A large chunk of India’s workforce is employed informally, especially in sectors like apparel, jewellery, construction, and unorganised manufacturing. These workers are most vulnerable to external shocks, with limited job security or social protection. As exports dip or input costs rise, informal workers often face immediate retrenchment,delayed wages and reduced working hours or factory closures. Lag in Job Creations: Recent Tariff Tensions might deter domestic and foreign investors from committing capital to India’s export-linked sectors. This may hamper the government's Make in India and PLI (Production-Linked Incentive) initiatives aimed at creating manufacturing jobs.
China dumping products in India

26.

What are the positive aspects for India?

Sectors	Analysis
Trade Diversions	With American importers looking to reduce reliance on Chinese suppliers, India stands to benefit from a re-routing of global trade flows. Key sectors like electronics, pharmaceuticals, textiles, chemicals, and auto components could see an uptick in exports to the U.S., mirroring gains made during the previous U.S.-China trade war. Example: In the past, Indian electronics and engineering exports to the U.S. rose due to tariff-induced demand shifts. A similar scenario may unfold again, boosting export revenues and capacity utilization in domestic industries. Also Certain untapped sectors could see specific benefits. For example, if US tariffs on Chinese dairy products create a void, India, with a significant dairy industry, could potentially step in to fill that gap in the US market or in regions traditionally supplied by the US.
Leveraging Changed Geopolitical Dynamics	China, under economic stress due to U.S.tariffs,has extended diplomatic overtures toward India—proposing expanded bilateral trade and mutual economic cooperation. This opens a window for India to strategically negotiate better trade terms with both China and the U.S., and to reduce over-dependence on any single trading partner by diversifying export destinations. Recently,Chinese President Xi Jinping told his Indian counterpart Droupadi Murmu that the two countries should work more closely together and their relationship should take the form of a "Dragon-Elephant tango" - a dance between their emblematic animals.
Reconfiguration of Global Value Chains	The Global Value Chain disruptions amid the ongoing trade tariff tensions provides new opportunities for India to tap into untapped international production networks, especially in semiconductors, specialty chemicals, and processed foods.
Revamping Domestic Momentum	Trade tensions can act as a blessing in disguise in accelerating internal economic reforms—such as improving logistics, infrastructure, tax clarity, and labour laws—to better attract relocating companies and expand exports.
India-China relations	India and China have long had a complex relationship, marked by political tensions and border disputes, but their economic interdependence has never faded. With Trump’s latest trade war escalation, both nations may find common ground to deepen trade ties, reduce dependence on the US market, and develop alternative economic strategies that benefit both sides. Recently, Chinese President Xi Jinping told his Indian counterpart Droupadi Murmu that the two countries should work more closely together and their relationship should take the form of a "Dragon-Elephant tango" - a dance between their emblematic animals.

27.

Why is Andhra Pradesh Chief Minister N Chandrababu Naidu concerned with US tariffs?

Amid US President Donald Trump’s tariff announcements, Andhra Pradesh Chief Minister N Chandrababu Naidu has written to the Centre, seeking help for the state’s fish farming products.
Naidu has requested the central government to ensure that products like shrimp are exempt from additional duty.
Andhra Pradesh is a major exporter of shrimp and fish to the US.
Aqua farmers and shrimp and fish exporters operate with 5 to 6 per cent profit margins, according to officials.
The Trump administration has levied a 27 percent tariff on aqua exports from India, which will come into effect this week, apart from a 5.77% countervailing duty and a 1.38% anti-dumping duty imposed by the US Department of Commerce.
This will drastically increase the cost of exports.
On the other hand, countries that compete with India, especially Ecuador, face less tariffs, with the US imposing only 10 per cent tariff on the South American country.
This will harm the interests of Indian aqua farmers.

28.

Why is Andhra Pradesh Chief Minister N Chandrababu Naidu concerned with US tariffs?

Measures	Analysis
Diversification of Supply Chains	By diversifying supply sources, companies can reduce their dependence on imports from countries with high tariffs. Establishing relationships with suppliers in different geographical locations helps mitigate risks associated with any single country's tariff policy.
Utilization of Trade Finance Instruments	Financial instruments such as letters of credit, trade credit insurance, and factoring provide safeguards against the uncertainties tariffs bring. These tools help manage the risks of nonpayment and supply chain disruptions, providing more stability in cash flow management.
Cost Management and Efficiency Improvements	Streamlining operations and adopting lean management techniques can offset some of the cost pressures brought on by tariffs. Efficiency improvements in production and logistics can reduce overall operational costs, helping to absorb the impact of tariffs.
Governmental and Legal Support	Engaging with trade associations and seeking government assistance programs designed to support businesses impacted by tariffs can provide relief. Additionally, understanding legal avenues to challenge or apply for exemptions from certain tariffs can be crucial.
Strategic Stockpiling	Where feasible, stockpiling goods prior to tariff implementations can lock in lower prices and provide a buffer against immediate price increases. This requires careful planning to avoid excess inventory and associated costs.

29.

Enlist measures to stop trade war?

In order to stop a trade war, it’s crucial to prioritize diplomatic engagement, open communication, and negotiation of fair trade agreements.
Countries involved should address the root causes of the dispute, such as unfair trade practices, intellectual property concerns, or tariff imbalances, through constructive dialogue and compromise.

Measures	Analysis
Diplomatic Engagement	Open Communication: Start by initiating open and transparent discussions to address concerns before tensions escalate into full-blown trade wars. Utilize backchannel diplomacy if needed. Summit or Trade Talks: Schedule high-level meetings to bring the countries’ leaders or trade ministers together. This can help reduce misunderstandings that arise from a lack of direct communication. Third-Party Mediation: Engage international organizations like the WTO or regional bodies (e.g., ASEAN, EU) to mediate trade disputes. These institutions can provide neutral arbitration, making the process less confrontational.
Negotiating Trade Deals	Revisit Existing Agreements: Take a close look at existing trade agreements (like NAFTA or EU-Canada CETA) to find areas that might be skewed, outdated, or unfair. Renegotiate clauses that trigger grievances, ensuring both sides benefit more equally. Address Root Causes: Dive deep into the underlying causes of the trade war, such as currency manipulation, unfair subsidies, or intellectual property violations. Target these specific problems through negotiated solutions rather than using blanket tariffs.
Focus on Fair Trade Practices	Strengthen Intellectual Property Protections: Address IP theft or forced technology transfer in trade negotiations by demanding stricter enforcement of international IP laws. This should be done under WTO or bilateral agreements. Transparency & Market Access: Ensure that market access is provided on a non-discriminatory basis, so companies from both sides can compete on equal terms. This includes eliminating hidden barriers like discriminatory taxes, tariffs, or licensing requirements. Avoid Protectionism: Shift away from protectionist policies (like excessive subsidies or tariffs that favor domestic industries) that disrupt global trade and harm international relationships.
Economic Incentives & Cooperation	Incentivize Collaboration: Incentivize trade cooperation by offering joint ventures or investment opportunities in sectors that matter to both sides. For instance, countries can collaborate in technology, renewable energy, or infrastructure development. Strategic Alliances: Build broader economic alliances or regional trade blocs (like APEC, Mercosur, or the Trans-Pacific Partnership), where all members benefit from smoother trade relations and coordinated policies. Shared Goals: Focus on creating joint economic goals that benefit both sides. For example, working together on global climate change solutions or new technologies can foster greater cooperation, making a trade war less appealing.

What is the relevance of the topic for UPSC CSE?

For Prelims: India-US Relations, LEMOA, COMCASA, BECA, Silicon Valley, International Bank for Reconstruction and Development , Exercise Malabar, NISAR mission , Digital services tax , CAATSA, US-India initiative on Critical and Emerging Technology.

For Mains: Significance of the United States for India, Key Issues in India-US Relations, Trade war, Role of WTO.

Check Complete UPSC CSE Syllabus

Know about UPSC Civil Services Exam

Some Previous Years Prelims Questions

Q1. What is “Terminal High Altitude Area Defense (THAAD)”, sometimes seen in the news? (2018)

(a) An Israeli radar system

(b) India’s indigenous anti-missile programme

(d) A defence collaboration between Japan and South Korea

Ans: (c)

Check UPSC Prelims Previous Year Question Papers

Some Previous Years Mains Questions

Q1. ‘What introduces friction into the ties between India and the United States is that Washington is still unable to find for India a position in its global strategy, which would satisfy India’s National self-esteem and ambitions’. Explain with suitable examples.(2019- 15 Marks)

Check UPSC Mains Previous Year Question Papers

Some Questions from This Year and Previous Years Interview Transcripts

Board Dinesh Dasa sir:

What is Reciprocal tariff and what are their impacts?
Tell me something about globalization and De-globalisation.

Board Lt general Raj shukla sir:

Tell me something about the Tariff war by Trump.
What is the percentage of tariff imposed on China, Canada and Mexico?
Why are tariffs imposed on these countries?
Tell me something about the Auto tariff on india export and car brand exported from india

Board Sheel Vardhan Singh sir:

You are interested in Geopolitics.
I am a magician.
I turn you into President Zelenskyy and those sitting beside you are Mr. Trump and Mr. Putin.
How would you negotiate?