Decoding the economics of Trump’s tariffs

In Focus by The Hindu

US President Donald Trump has often said that ‘tariff’ is his favourite word. Within weeks of taking office, he imposed 25% tariffs on all imports from America’s two biggest trading partners, Mexico and Canada, and 10% tariffs on goods from China. Subsequently, he paused the tariffs for 30 days, after Mexico and Canada promised to take certain measures to curb illegal migration and cross-border fentanyl smuggling.

Given his repeated statements that he is looking at tariffs as a source of revenue it seems like he is viewing tariffs as a permanent feature rather than as a temporary negotiating tool, as some analysts have suggested. He has also used aggressive rhetoric about imposing 100% tariffs on BRIC+ countries if they tried to create an alternative to the dollar.

How do we understand these moves from the Trump administration? Won’t they also adversely impact American consumers and businesses? Is the US moving away from a half-century old paradigm of open trade and integrated markets, to one of local production and protected markets? How should the Global South respond to these measures, given the disparity in economic power?

Guest: economist C.P. Chandrasekhar, Senior Research Fellow at the Political Economy Research Institute, University of Massachusetts, Amherst, US.

Host: G. Sampath, Social Affairs Editor, The Hindu.

Edited by Sharmada Venkatasubramanian.