India averts first set of Trump tariffs that hit China, Mexico and Canada from Feb 1

 

China, Mexico, and Canada are the top contributors to the US trade deficit, with China contributing the highest at 30.2 per cent, Mexico 19 per cent, and Canada 14 per cent.

India did not find a mention in the first set of tariffs that US President Donald Trump announced on Friday. Trump imposed 25 per cent tariffs on Mexico and Canada, and 10 per cent on China, on the grounds of a “high trade deficit”, effective from February 1.

China, Mexico, and Canada are the top contributors to the US trade deficit, with China contributing the highest at 30.2 per cent, Mexico 19 per cent, and Canada 14 per cent, according to the Research and Information System (RIS).

“We have big deficits with all three of them. And in one case, they’re sending massive amounts of fentanyl, killing hundreds of thousands of people a year with fentanyl. And in the other two cases, they’re making it possible for this poison to get in. We have about a $200 billion deficit with Canada… and a $250 billion trade deficit with Mexico,” Trump said during a press briefing.

The Economic Survey released on Friday stated that, at a broader level, India’s import tariff policy has evolved over time, balancing domestic policy goals with the need to integrate into the global economy.

“Tariffs vary by sector, with considerations such as protecting sensitive sectors from foreign competition and permitting access to important raw materials and intermediate goods. India has ensured that tariff policies comply with WTO rules and regulations. Over time, several efforts have been made to rationalise tariffs further and address the inverted duty structures,” the survey said.

The Peterson Institute for International Economics, in its report on January 17, said that if the US imposed an additional 10 per cent tariff on China and China responded in kind, US GDP would be $55 billion less over the four years of the second Trump administration, and $128 billion less in China.

“Inflation would increase by 20 basis points in the US, and after an initial dip, by 30 basis points in China. The initial fall in inflation in China is caused by a temporary tightening of Chinese monetary policy aimed at offsetting the depreciation of the Chinese currency,” the report stated.

NITI Aayog CEO BVR Subrahmanyam, in December, suggested that trade policies under US President-elect Donald Trump could result in a potential economic boom for India, driven by significant trade diversion in global trade.

The Global Trade and Research Initiative (GTRI), in its report last month, said that the US-China trade war, initiated in 2018 under President Trump with tariffs targeting key sectors, significantly reshaped global trade flows but failed to achieve its primary goals.

“While US imports from China declined by $81.56 billion between 2017 and 2023, the overall US trade deficit widened as imports shifted to non-Chinese sources, bypassing tariffs through free trade agreements. Meanwhile, China showcased remarkable resilience, increasing its global exports by $1.1 trillion and cementing its role as a critical player in global supply chains for electronics, pharmaceuticals, and renewable energy,” GTRI said.