TRUMPS TARIFFS – NAVIGATING THE NEW REALITY

TRUMPS TARIFFS – NAVIGATING THE NEW REALITY 

TRUMPS TARIFFS – NAVIGATING THE NEW REALITY

On 27 Aug 2025 at 9.31 AM, as the additional 25 percent ‘punitive’ tariffs were slapped on India, Trump for good measure finally shed his ‘mukhota’…..the veneer of effusive bonding with Prime Minister Modi.  The writing had been on the wall since the G-20 summit at Osaka in June 2019, but India in the mould of many others imagined they could talk through the threats.  Now that the ‘head spinning’ tariffs are out of Uncle Sam’s ‘top hat’, the ball is firmly in India’s court!

The customised prescription for India has more to do with MTG (making Trump great), than MAGA.  The immediate casus belli of additional tariffs is if anything else, an attempt to shift the blame for his failure to force peace between Russia-Ukraine, and on a personal level, India’s intransigence to feed his narcissist appetite as the ‘prince of peace’ in India’s backyard, the latter perhaps playing an outsized role!  Some also suggest that, Trump felt slighted by Modi giving him the miss during his state visit to USA in Sep 2024; a meeting which the former had grandiosely declared to the media, and which still rankles in his mind.  Whatever the case, it is also a fact that, ‘envy is the companion of fame’ and India’s progression does not have many enthusiastic endorsers. In sum, the pot was already simmering; it needed a trigger to bring the broth to a boil. Interestingly, amidst all the accusations, Trump has continued to hail Prime Minister Modi, a la Mark Antony in his machiavellian speech at Caesar’s funeral…’but Brutus was an honourable man’. So much for being Shakespearean in style and imperial in ambition!

USA has a history of ‘using tariffs as a bludgeon to coerce other nations to tow the line’.  Starting from the Smoot-Hawley Tariffs in 1930 to the Steel War with Europe in 2002 and  even the Trump tariffs during his first presidency, these were largely specific tariffs.  However, now with his ‘laddish’ leadership and economic ultra nationalistic ‘America Only’ policy, Trump has shifted the goal post with the sheer span of the tariffs, making it a multi-front tariff war. In the bargain, he has also usurped for himself the dubious distinction of unseating fellow Republican William McKinley, the 25^th President of the USA, as the ‘Tariff King’.  Historically, most analyses reveal that while tariffs may generate returns, this is outweighed by the negative impacts on economic growth, inflation and inter-state relations. It doesn’t take too much mother’s wit to comprehend what has been aptly stated by the former US Deputy Assistant Secretary of State, Evan A. Feigenbaum that, the ‘re-politicization of US-India relations is a slow motion catastrophe.’

The euphoria of a sudden glut in customs revenue @ about $160 billion, has  received the first hit from the US Court of Appeals, declaring it illegal to invoke national emergency as justification for hiking the import taxes. Trump will brow beat to get a favourable decision from the Supreme Court but, in the unlikely event that this doesn’t happen, the refund to importers in Trump’s own words will, ‘literally destroy the United States of America.’  Donald Trump runs the real risk of going down in the history of USA, as the first President against whom impeachment proceedings have been initiated thrice…and perhaps this time booted out as well!  A country which prides itself as the leader in human rights also needs to be reminded that the reckless decision of its President is also an indirect attack on the realization of certain human rights for individuals and businesses.

A back of the envelope calculation suggests that India may stand to lose close to 900-1000 billion dollars, even though the cumulative tariff will actually impact only about 60 percent of Indian exports.  This is by all accounts the greatest challenge to Prime Minister Modi in his 11 years at the helm, one which he seems to be prepared for, as he avers, ‘I know that I will personally have to pay a heavy price, but I am ready for it….’ Whatever the cost, it will require the government to make good all its claims of a robust economy and diplomatic heft.  It is  also the time to redeem the ‘bear hugs’ and leverage the diaspora jamborees, which were sought to be an endorsement of the leadership. Let’s hope the cumulative economic and political heat doesn’t make it a ‘survival’ battle, which is perhaps what ‘Doland’ and Co. will be yearning for.

It is somewhat disconcerting that the tariff headwinds are blowing as India is transiting through Amrit Kaal towards the ambitious goal of Viksit Bharat in 2047; therein lies the challenge. But then, as Albert Einstein had famously remarked that, ‘in the midst of every crisis, lies great opportunity’. In that sense, Trump has unwittingly given India a significant opportunity, if not a wakeup call, to reorient and recalibrate the economic compass both domestically and internationally. A tit for tat approach may soothe nationalistic emotions, but may be counterproductive.  The overall framework of mitigation needs to embody measures to obviate future vulnerability to similar predicaments. India’s pole position in the Global South and its global influence as the fourth largest economy should make this task easier. And, finally, the yardstick of a nation to measure its self esteem is to see to what extent it is self reliant.  The country needs to switch from the highway to the expressway, and accelerate towards swadeshi and atmanirbharta…..not out of desperation, but out of pride!

It is worth mentioning that ‘tariffs are largely one and done type of pressure. Once adopted and raised to a level that destroys the trade relationship, they lose leverage.’ This implies that if India successfully stems the tide and continues to source oil from Russia, Trump may well work out new ways to pressure New Delhi. India’s contingency planning must take this into account.  We need not respond to the daily dose of invectives being heaped by Trump and his Trumpeters on India, but we can certainly endeavour to ensure that USA remains open for business and does not become a ‘shuthole.’  Trump’s romance with Asim Munir too is not without motives…..for the time being his fling with the ‘dump truck full of gravel’ is to spite the ‘shining mercedes’!  Time will tell how Trump will leverage Pakistan to keep the pressure on India. The peril is that Pakistan may well once again end up becoming a ‘geopolitical football’, with all its unintended downsides!

Domestically, the pressing priority is a ‘whole of society approach’……it is a shared problem and every citizen of India has a role to play.  We have the shining example of the swadeshi movement led by the trio of ‘Lal-Bal-Pal’, who championed the use of domestic goods, during the national movement, in 1905. Most importantly amidst this challenge, the political leadership must act as a unifying force, give direction, not mislead and, embody the changes they want to see, influencing others through their attitude, behavior and actions…..something which is gravely deficient. Finally, the nation as a whole needs to talk less and do more and stop tooting one’s own horn….we may like to take a leaf out of our eastern neighbour!

Prime Minister Lal  Bahadur Shastri  had remarked that, ‘there comes a time in the life of every nation when it stands at the crossroads of history and must choose which way to go.’  India is standing at the cusp of change; we need to stand up and fight bullying and coercion and ensure the country’s strategic autonomy is not compromised. The world is watching; it is a litmus test for the potential ‘vishwaguru’!

(Major General Rajiv Edwards, VSM** (retd) is a historical researcher and commentator on societal issues.  He is apolitical. Views expressed are personal)