<p>The US President's move to impose, what he has called "reciprocal tariffs" on US imports, has stoked the fear of a global trade war with major economies including China and the EU threatening to retaliate. It has caused jitters in the global stock markets. In this issue of <em>DH Deciphers,</em> Gyanendra Keshri decodes Trump's tariff announcements and the impact on global trade and the economy.</p>.<p><strong>What are tariffs?</strong></p><p>Tariffs are a form of tax applied on imports from other countries. Typically, it is applied as a percentage of a product's value. For example, a 50 per cent tariff on a car valued at Rs 10 lakh would mean an additional Rs 5 lakh charge. Companies that import a foreign product into a country have to pay the tax to the government. Mostly the tax is passed on to the consumers. In some cases com- panies can absorb a part of the tax burden to stay competitive.</p><p><strong>How will Trump's tariff move impact the global economy?</strong></p><p>Analysts warn that Trump's tariff move will stoke inflation and push the global economy into recession. Tariffs are mostly passed on to the consumers. Major economies in- cluding China and the European Union have threatened to impose retaliatory tariffs. Ultimately this will be passed on to the consumers leading to higher inflation. Jump in prices will dampen demands, which analysts fear will lead to job losses and recession in the global economy.</p>.Steeper tariffs on neighbours possibly a silver lining for India.<p><strong>What do reciprocal tariffs mean? </strong></p><p>Reciprocal tariffs refer to a move when a country matches the taxes that another country places on its goods. For example, if India imposes 25 per cent tariffs on import of cars from the US, then the US responds by imposing the same 25 per cent tax on imports from India. Reciprocity could be product specific, sector specific or country specific.</p><p><strong>What are the tariffs Donald Trump has announced?</strong></p><p>Through an executive order issued on April 2, President Donald Trump announced imposition of new tariffs on US imports from all countries. The move includes imposition of 10 per cent baseline tariffs on all imports to the US. Additional tariffs in the range of 10 to 50 per cent have also been announced.</p><p><strong>How will US tariffs impact the Indian economy and trade?</strong></p><p>The <a href="https://www.deccanherald.com/tags/united-states">United States</a> is the largest buyer of Indian goods. The imposition of high- er tariffs will impact several sectors, which export a substantial amount of the products to the North American markets. However, there are several posi- tives. Imposition of higher tariffs on competitors may offer India competitive advantage. For example, in the textiles sector India's major competitors are China, Vietnam, Bangladesh and Pakistan. All these have been imposed with higher tariffs than India. This may enhance India's relative competitiveness and present an opportunity to increase its share of textile exports to the US.</p><p><strong>How will the new announcements impact the tariffs on US imports?</strong></p><p>Before the announcement of new tariffs, average tax imposed by the US on imports stood at 3.3 per cent, as per data shared by the White House. According to Fitch Ratings, the effective tariffs on imports in the US were 2.5 per cent in 2024. The new announcements will take it to 22 per cent, which will be the highest since 1910.</p><p><strong>What are the tariffs India will face and how does it compare with other countries? </strong></p><p>Trump announced that India will face "discounted reciprocal tariffs"<strong> </strong>of 26 per cent. However, an annex document shared by the White House shows 27 per cent tax on India. India's neighbours and major competitors face higher tariffs. Trump announced 34 per cent new tariffs on China. This is in addition to 20 per cent taxes imposed earlier this year. So the effective tariff rates on Chinese goods imports to the US will jump to 54 per cent. Bangladesh, which is a major India's competitor in the textiles sector, will face 37 per cent tariffs in the US markets. Sri Lanka has been slapped with 44 per cent tariffs while Pakistan faces 29 per cent. Vietnam has been hit with 46 per cent tariffs while Thailand and Taiwan will face 36 per cent and 32 per cent, respectively. Cambo- dian products will face a tariff of 49 per cent while goods from the EU will be taxed at 20 per cent in the US.</p>
<p>The US President's move to impose, what he has called "reciprocal tariffs" on US imports, has stoked the fear of a global trade war with major economies including China and the EU threatening to retaliate. It has caused jitters in the global stock markets. In this issue of <em>DH Deciphers,</em> Gyanendra Keshri decodes Trump's tariff announcements and the impact on global trade and the economy.</p>.<p><strong>What are tariffs?</strong></p><p>Tariffs are a form of tax applied on imports from other countries. Typically, it is applied as a percentage of a product's value. For example, a 50 per cent tariff on a car valued at Rs 10 lakh would mean an additional Rs 5 lakh charge. Companies that import a foreign product into a country have to pay the tax to the government. Mostly the tax is passed on to the consumers. In some cases com- panies can absorb a part of the tax burden to stay competitive.</p><p><strong>How will Trump's tariff move impact the global economy?</strong></p><p>Analysts warn that Trump's tariff move will stoke inflation and push the global economy into recession. Tariffs are mostly passed on to the consumers. Major economies in- cluding China and the European Union have threatened to impose retaliatory tariffs. Ultimately this will be passed on to the consumers leading to higher inflation. Jump in prices will dampen demands, which analysts fear will lead to job losses and recession in the global economy.</p>.Steeper tariffs on neighbours possibly a silver lining for India.<p><strong>What do reciprocal tariffs mean? </strong></p><p>Reciprocal tariffs refer to a move when a country matches the taxes that another country places on its goods. For example, if India imposes 25 per cent tariffs on import of cars from the US, then the US responds by imposing the same 25 per cent tax on imports from India. Reciprocity could be product specific, sector specific or country specific.</p><p><strong>What are the tariffs Donald Trump has announced?</strong></p><p>Through an executive order issued on April 2, President Donald Trump announced imposition of new tariffs on US imports from all countries. The move includes imposition of 10 per cent baseline tariffs on all imports to the US. Additional tariffs in the range of 10 to 50 per cent have also been announced.</p><p><strong>How will US tariffs impact the Indian economy and trade?</strong></p><p>The <a href="https://www.deccanherald.com/tags/united-states">United States</a> is the largest buyer of Indian goods. The imposition of high- er tariffs will impact several sectors, which export a substantial amount of the products to the North American markets. However, there are several posi- tives. Imposition of higher tariffs on competitors may offer India competitive advantage. For example, in the textiles sector India's major competitors are China, Vietnam, Bangladesh and Pakistan. All these have been imposed with higher tariffs than India. This may enhance India's relative competitiveness and present an opportunity to increase its share of textile exports to the US.</p><p><strong>How will the new announcements impact the tariffs on US imports?</strong></p><p>Before the announcement of new tariffs, average tax imposed by the US on imports stood at 3.3 per cent, as per data shared by the White House. According to Fitch Ratings, the effective tariffs on imports in the US were 2.5 per cent in 2024. The new announcements will take it to 22 per cent, which will be the highest since 1910.</p><p><strong>What are the tariffs India will face and how does it compare with other countries? </strong></p><p>Trump announced that India will face "discounted reciprocal tariffs"<strong> </strong>of 26 per cent. However, an annex document shared by the White House shows 27 per cent tax on India. India's neighbours and major competitors face higher tariffs. Trump announced 34 per cent new tariffs on China. This is in addition to 20 per cent taxes imposed earlier this year. So the effective tariff rates on Chinese goods imports to the US will jump to 54 per cent. Bangladesh, which is a major India's competitor in the textiles sector, will face 37 per cent tariffs in the US markets. Sri Lanka has been slapped with 44 per cent tariffs while Pakistan faces 29 per cent. Vietnam has been hit with 46 per cent tariffs while Thailand and Taiwan will face 36 per cent and 32 per cent, respectively. Cambo- dian products will face a tariff of 49 per cent while goods from the EU will be taxed at 20 per cent in the US.</p>