Decoding Trump's 'Liberation Day' Tariffs

As the dust settles on Trump's new tariff wall, Mint explains the implications-for the US, India and rest of the world

- N. Madhavan

In 1947, the US led 23 nations into signing the General Agreement on Tariffs and Trade (GATT). The effort was to lower trade and tariff barriers among nations. Over the next 48 years, it took eight rounds of painstaking negotiations before GATT could evolve into the World Trade Organization (WTO) in 1995.

On April 2, in a speech that lasted 48 minutes, US President Donald Trump effectively shredded this multilateral trading system and signaled a fundamental shift in US trade policy.

Speaking from the White House Rose Garden, Trump levied what he called reciprocal tariffs on all trading partners. The quantum of tariffs stunned the world. He announced a universal tariff of 10% on all imports. But countries which enjoyed a trade surplus with the US were hit with much higher tariffs. No trade partner, big or small, was spared. China was slapped with a 34% duty but if one added the 20% tariff imposed earlier, it totaled 54%. Vietnam got 46%; India 26%; and the European Union 20%. These duties are over and above what various countries were charged earlier.

Even remote uninhabited islands such as Heard and McDonald Islands, located 4,100 km from Western Australia and home to penguins and seals, were hit with a 10% tariff. Australian territories such as Norfolk Island, Cocos Islands, and Christmas Island with an aggregate population of 4,236 people were tariffed too. So was Diego Garcia, a British territory in the Indian Ocean with no permanent population. It just houses a joint UK-US military base.

A few countries did not feature in the April 2 list—Canada, Mexico, Russia, North Korea, Cuba, and Belarus. Canada and Mexico were spared because Trump had already levied a 25% tariff on all imports from the two nations excluding those items that fall under the United States-Mexico-Canada Agreement (USMCA). Russia, Cuba, North Korea, and Belarus were excluded as they are heavily sanctioned and have no "meaningful trade" with the US.