‘TACO’ Effect

It is interesting to note US President Donald Trump keeps changing his deadline for imposing new tariffs on goods from China, while he does not show any wavering when it comes to other countries, including India and also his European allies.

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In May, the US and China had averted an economic catastrophe by reducing massive tariffs they had slapped in April on each other’s products, which had reached as high as 145 per cent against China and 125 per cent against the US. Both countries seem to have struck a secret deal between themselves which others are not privy to.

Those triple-digit tariffs threatened to effectively end trade between the US and China, causing a frightening selloff in financial markets. In a May meeting in Geneva, both agreed to back off and keep talking: ‘America’s tariffs went back down to a still-high 30 per cent and China’s to 10 per cent. The “reciprocal tariffs” Trump initially rolled out in early April were quickly paused for 90 days. But, Trump extended a trade truce with China for another 90 days on 11 August, only a day before the earlier deadline was to expire. This was obviously to delay, once again, a dangerous showdown between the world’s two biggest economies and military powers.