Tariffs and Tribulations

Trump’s trade wars promise pain today for a distant and uncertain gain.

Donald Trump’s latest broadside, sweeping tariffs on Canada, Mexico and China, lands a punch in the gut to global markets and American consumers alike. The move, cloaked in the language of nationalism, fulminates against fentanyl, illegal immigration and economic injustice. The president, now fully unshackled in his second term, has declared a national emergency, citing the International Emergency Economic Powers Act to impose tariffs of 25 percent on Canada and Mexico and 10 percent on China.

Trump’s protectionist crusade is not new. Higher tariffs on Canadian lumber and Chinese pharmaceuticals have invited swift retaliation. Mexico and Canada have announced countermeasures, while China plans to challenge the move at the WTO. The last tariff war (2018–19) drove up costs for U.S. firms and consumers, and history may repeat itself. Automakers like Volkswagen warn of supply chain disruptions, while energy producers brace for instability.

Trade wars are neither good nor easy to win. The 2018-2019 tariff battles resulted in higher costs for American businesses and consumers, with studies showing that the bulk of the financial burden fell on U.S. firms rather than foreign exporters.

For American households, the effects will be immediate. A new round of tariffs means higher costs on everything from household appliances to food. Trudeau’s retaliatory tariffs on $155 billion worth of U.S. goods including peanut butter, beer and wine will send ripple effects through the agricultural sector. Meanwhile, Mexican and Chinese countermeasures could squeeze American manufacturers, forcing them to pass costs onto consumers.

The prime justification for these tariffs is their purported link to the fentanyl crisis. The Trump administration insists that Mexico and Canada are complicit in the opioid epidemic, citing a “growing presence” of fentanyl production in both nations. Yet, experts in law enforcement and public health overwhelmingly disagree.

Critics disagree with the White House’s assertion that fentanyl has killed tens of millions of Americans. At the peak of the opioid crisis in 2022 and 2023, total overdose deaths, from all drugs combined, reached around 114,000 annually - a national tragedy, no doubt, but nowhere near the apocalyptic scale Trump describes.

Trump’s weaponization of emergency powers to enact these tariffs is already facing legal scrutiny. The International Emergency Economic Powers Act was never intended to be a trade cudgel. Beyond its domestic consequences, Trump’s tariff blitzkrieg is straining America’s global alliances at a precarious moment. The European Union has said it would respond firmly should Trump extend his tariff war across the Atlantic.

For India, the tariff war presents a complex scenario in form of both risks and opportunities in the evolving global trade landscape.

On the one hand, the disruptions in U.S.-China trade relations could allow India to position itself as an alternative manufacturing hub, particularly in sectors like pharmaceuticals, electronics, and textiles. Multinational companies looking to diversify supply chains away from China may consider India, especially given New Delhi’s efforts to incentivize domestic production under the Production-Linked Incentive (PLI) scheme.

On the other hand, India could also suffer collateral damage. The global slowdown triggered by trade wars could dampen demand for Indian exports, particularly in sectors like IT services, auto components, and chemicals, where India depends on both China and the U.S. for raw materials and markets.

Trump has long accused India of being a “tariff king” and has previously targeted Indian exports. However, New Delhi has been taking steps to improve trade optics. Recent budgetary revisions have reduced peak customs duty rates from 150 percent to 70 percent, signalling an attempt to counter criticism from Washington.

While India has not been directly affected by the latest round of U.S. tariffs, its diplomatic strategy will be crucial. Prime Minister Narendra Modi’s government has been strengthening ties with Washington, particularly on defence and technology cooperation. If Trump were to escalate tariff measures against other trading partners, India may seek bilateral exemptions or leverage its growing strategic partnership with the U.S. to negotiate trade-offs in sectors like semiconductors, clean energy and defence procurement.