Prof Mithilesh Kumar Sinha
Department of Economics, Nagaland University, Lumami
Donald Trump's tariff bomb created panic all over the world. The impact of Trump's trade policies resonated worldwide, leading to the most significant single-day decline in Asian markets in 16 years. Due to this move America will be in danger of stagflation. At the same time, there is a danger of increasing inflation and stopping economic growth in America, which is called 'stagflation'. Apart from this, if other countries apply counter tariffs, then the global trade can become a situation of war.
Impacts on America: Directly, approximately 2% of EU27 GDP is influenced by demand from the US. With a 20% tariff, it is expected that shipments to the US will fall by around 15%. We project a -0.3% direct impact on GDP in the short term. The countries most affected are Ireland, Germany, and Italy, while the Central and Eastern European region is less vulnerable.
Indirectly, reduced exports, increased competition from Asian imports, and heightened uncertainty will result in decreased investments and wage growth, potentially causing some job losses in Europe. These adverse impacts are expected to be experienced in 2025 and 2026. o If the euro strengthens and remains so, stemming from the US losing its status as a safe haven, external demand will decline. o Potential retaliation: The only estimate currently available from the ECB indicates a decrease of -0.2%, though it lacks detailed breakdowns.
Impact on Asia: The tariff rates in this region are elevated compared to other areas, primarily due to a strong emphasis on exports to the United States. This results in a significant effect. Nations such as Vietnam, Thailand, Japan, and Korea experience the most substantial repercussions, with effects reaching as high as 5.5% of their GDP.
Impact on China: We project a decrease of 0.4-0.8 percentage points in GDP, contributing to excess industrial capacity and deflationary pressures. In response, the nation has implemented 34% tariffs universally and imposed export restrictions on rare earth materials.
Impact on India: Trump's tariff in India is just a hypothetical panic. India is in good position to benefit from changing business scenario rather than losing jobs. A bilateral trade agreement (BTA) was announced after the Indian Prime Minister's visit to America, which would streamline trade policies and promote economic cooperation. Additionally, American participation in the India-West Asia-Europe Economic Corridor (IMEC) creates new opportunities for India.
There is neither fear of increasing inflation nor danger of going to job. There is less risk of increasing inflation and employment in India due to the imposition of tariff by America. India exports about $ 75.9 billion to the US every year. This includes areas such as drugs ($ 8 billion), cloth ($ 9.3 billion) and electronics ($ 10 billion). The demand in these areas is expected to remain stable. Employment depends on both domestic demand and export. Most of the areas exporting to the US from India have been exempted from fees or they have been levied. Therefore, there is less possibility of people's jobs in India
The impact of this tariff policy on India's economy is expected to be limited. According to the report of Goldman Sachs, Trump's tariff bomb may reduce India's GDP only 0.19 per cent, which is equal to the fall in income of Rs 2396 per family annually. The reason for this is India's strong domestic demand and its limited stake in global exports (2.4 percent).
India is a major trading partner of America. Between April and February 2025, India has exported goods worth $395.63 billion to the US. Increasing tariffs will definitely affect textile, electronics and agricultural products. We can understand this in other words that India sends clothes worth $ 8 billion and $ 5 billion agricultural products to America every year. But due to more tariffs on countries like Bangladesh and Vietnam, Indian products will be relatively cheap and exports can get a new opportunity.
