Pre-empting Trump 2.0

IN THE CONTEXT OF A MORE COMPLEX TRADE LANDSCAPE, BRACING FOR SHOCKS IS THE APT STRATEGY

- AMITENDU PALIT

It is difficult to gauge how much the onset of Trump 2.0 influenced India's Union Budget. But a number of announcements in the Budget address bringing down the cost of Indian exports and revising customs tariffs. These decisions would have been taken in the greater context of the developments impacting the world economy, one of the most significant of which is the beginning of Trump 2.0.

Trump 2.0 is barely a fortnight old and is yet to announce any decisions on tariffs or trade policy that will directly, or indirectly, impact India. But for some other US trade partners, tariffs are looming large. Indeed, according to the White House, Canada, Mexico, and China will be hit with tariffs of 25%, 25%, and 10% respectively, from February 1 itself.

There isn't much surprise in the first round of tariffs being brought in by the Trump administration. These were widely expected from the statements made by Trump during his election campaign. China, Mexico, and Canada are not just the largest sources of imports for the US; they are also trade partners with whom the US runs the largest trade deficits. In fact, India's trade surplus of $43 billion with the US is barely 10% of the surplus that China has with the US; it is a little more than one-third of the surplus that Mexico runs, and just under half of that of Canada's.