The good news is that with election fever in the US over, and having won the presidential election, Trump is now a wee bit sober. Thus, the actual damage would likely be less than what experts have been forecasting. For two reasons:
Tariff bullying Trump believes as much in the power of bullying as in action. He believes as much in the threat of tariffs as tariffs themselves. Trump 1.0 is evidence that his bark is worse than his bite. On tariffs, this appears to be the Donald mantra. Over the past two years, he has repeatedly threatened to slap between 60% and 100% tariffs on imports from China, and between 10% and 20% across-the-board tariffs for other countries.
Yet, as the day of his second inauguration comes closer – despite his ‘they tax us, we tax them’ statement picking out countries like India and Brazil – his tariff threats are acquiring a somewhat sombre tone. In a recent press interview, Trump mentioned that his government will impose a 10% tariff on Chinese goods, a sixth of the lowest level he threatened during the campaign.
Get shifty The world economy has been getting ready for Trump’s tariffs for the past two years. Having prepared for the worst, Chinese exporters must be thrilled with the new concession. A 10% tariff is more manageable than a 100% tariff. Central Bank of China may arguably manage it with devaluing the renminbi by 10%. Chinese producers may choose to absorb a certain proportion of the expected tariff rather than risk losing their share of US exports to other countries.Global supply chains have been shifting in response – as well as in anticipation – of the straining of relations between the US and China. Tariffs from Trump’s first term, which the Biden administration continued, resulted in China’s share of US exports falling by almost a third between 2018 and 2024. The share of Asean countries correspondingly increased and at least a part of the increase was from Chinese traders exporting their merchandise from Asean countries. New tariffs, too, will lead to similar shifts.Globally, traders have increased shipments valuing under $800 that do not face any tariff under the US de minimis programme. In 2023, the number of shipments under the de minimis programme was 1.1 bn, an almost 3x since 2016. One estimate suggests that 11% of Chinese imports fall under this programme.
In September, US decided to exclude shipments falling under Sections 201, 301 of the Trade Act of 1974 from using the de minimis programme. But that has not affected businesses of newly emerging Chinese ecommerce platforms such as Temu and Shein.
Trump says he would impose a tariff of 25% on imports from Canada and Mexico, unless they clamp down on illicit drugs and migrants coming from the border. Both countries are highly dependent on the US market, with the latter accounting for roughly 80% of each country’s exports. These tariffs contradict the terms of the US-Mexico-Canada trade agreement that Trump signed, and would stoke inflation in the US and hurt the economies of all three North American countries.
How would India be affected by Trump’s tariffs? Trump hates trade deficits and his focus is on countries that have a high trade deficit with the US. India is not among the top exporters to the US. It is 10th on the list in terms of trade deficit. Rest assured, Trump will try to bully India. But, hopefully, India won’t be on the top of his list.
Vietnam was the biggest beneficiary of the tariff imposed on China in Trump’s first term. Many corporations moved their operations from China to Vietnam, and it experienced a steady rise in exports to the US. Vietnam now has the third-highest trade deficit with the US.
It must be on Trump’s list of countries that he would bully to bring the deficit down. In Trump’s first term, China’s loss of US trade share was grabbed by Vietnam. In his second term, India should position itself to benefit from expected restrictions and tariffs on China and Vietnam.
The writer is professor of social policy, Columbia University, US