Looking Past Trump Tariffs

It is time for collective action among like-minded economies rather than be caught in the US tariff turmoil

- AMITA BATRA

It is now close to 60 days since "liberation day" and the subsequent announcement by United States President Donald Trump of a 90-day stay on the implementation of reciprocal tariffs. Notwithstanding this, tariff threats by the US President against not just "countries of concern" but also allies and domestic firms continue almost on a daily basis. While this uncertain trade policy context makes it difficult to discern trends, some early signs of how global trade is evolving may be worth outlining.

First, while the exemption from reciprocal tariffs for United States-Mexico-Canada Agreement-compliant products and value added in case of auto/auto products was an early acknowledgement of the irrational specification of reciprocal tariffs by the US, it was not surprising as it involved allies and partner economies in a regional trade agreement.

The turnaround with China, however, tells a different story. The negotiations—easy and short over a weekend in Geneva—led to a significant cut in additional tariffs by the US from 125 per cent to 10 per cent for the next 90 days for China. This was a clear admission by the US trade team that, given China's centrality in global value chains (GVCs), the imposition of stupendously high tariffs on Chinese imports would be, first and foremost, detrimental to the US economy itself. China continues to be at the centre of GVCs and the largest exporter and importer of parts and components, despite the tariff, export, and technology-restrictive measures adopted during Trump 1.0 and further intensified during the Biden administration.