The Hindu: Published on 8th August 2025.
Why in News?
Former U.S. President Donald Trump, after returning to the White House, has imposed unprecedented tariffs on U.S. imports—raising the effective tariff rate from 2.5% to nearly 20%, the highest in a century. While the trade deficit has narrowed, concerns have risen over inflation, economic growth, legality of the tariffs, and long-term global trade stability.
Background:
In his first term, Trump launched a trade war mainly targeting China, citing unfair practices.
Tariffs were used as both economic and geopolitical tools.
Upon returning to power in 2025, Trump escalated this policy, raising tariffs broadly on multiple countries and negotiating bilateral deals.
Key Issues:
Tariff Hikes: Tariffs increased to 17–19%, possibly touching 20%—highest since 1930s.
Legal Challenges: Use of the International Emergency Economic Powers Act (IEEPA) to justify tariffs is under appellate court review.
Inflation & Jobs: Early data shows rising inflation and potential job losses.
Ad-hoc Decisions: Arbitrary imposition of tariffs on India, Brazil, Switzerland raises concerns about consistency and diplomacy.
Lack of Enforcement: Agreements lack clear mechanisms to ensure compliance by trade partners.
Impacts:
Economic:
Short-term gains in revenue and trade deficit narrowing.
Long-term risk of inflation, reduced consumer demand, and investment uncertainty.
Possible loss of global confidence in U.S. trade policies.
Geopolitical:
U.S. leveraging tariffs to pressure allies and adversaries alike.
Risk of diplomatic fallout with strategic partners (e.g., EU, India).
Future trade disputes may become harder to resolve.
Legal/Institutional:
If courts reject Trump’s interpretation of IEEPA, tariffs could be invalidated.
Supreme Court decision could shape the scope of presidential power in trade policy.
Expert Opinions:
Josh Lipsky (Atlantic Council): Trump is winning geopolitically but economic damage to the U.S. may outweigh benefits.
Michael Strain (AEI): Trump is causing more harm to Americans than his counterparts to their people—calling it a strategic loss.
Kelly Ann Shaw (Former White House Adviser): The aggressive strategy is supported by a strong economy and high stock markets, but long-term effects are uncertain.
Conclusion:
While Trump’s tariff-driven trade strategy projects strength and revenue gains in the short term, it faces serious legal, economic, and diplomatic challenges. The sustainability of this “win” will depend on court rulings, global responses, and domestic economic fallout in the coming months.