Trump's trade war may escalate: Will our interests go unscathed?

A US-friendly approach that doesn't compromise Indian interests could shield India from the fallout of US trade aggression

- ARPITA MUKHERJEE & AAHANA SRISHTI

The return of President Donald Trump to the White House has made tariffs a primary tool for addressing multiple issues that America faces, from illegal immigration and inflows of fentanyl and other drugs to its large trade deficit and need to increase government revenue.

Nonetheless, America is not alone and countries like India, Bangladesh, South Korea, Kenya and Nigeria have high tariffs, with many developed countries using tariffs to protect sectors like agriculture. While tariffs are often imposed to protect domestic industries, reduce trade deficits and raise government revenue, countries like South Korea have used them strategically to negotiate concessions in trade agreements. India employs tariffs to promote its 'Make in India' initiative.

Recently, President Trump imposed a 25% import tax on all steel and aluminum imports, despite warnings of retaliation by China, Canada and the EU. While this has escalated the fear of an all-out trade war, countries are also trying to work out alternative ways to respond, such as whether there is scope for legal recourse through trade agreements or for relief through bilateral dialogue.

The tariffs may impact the American economy, with its businesses facing higher production costs and consumers paying higher prices, but, as seen in India and elsewhere, the retaliation by domestic firms is often limited. Trump's actions also raise broad questions of whether trade agreements can ensure a predictable trade regime (or trade war risks will prevail), and if tariffs can be used to solve geo-strategic problems and strengthen national security and safety.