US Tariffs- An update

America has embarked on a new era with its new president in his second term, with a new economic norm. Tariffs are a new threat to American trading partners, all set to be introduced during the year. Initially introduced during the presidential campaign, no one anticipated it would be a reality.

US Tariffs- affecting the global economy

The real deal came in on April 2nd,2025, when Trump introduced an executive order imposing tariffs on all trading partners across the globe. The system followed was a reciprocal tariff where Americans would charge an equivalent tariff to their trading partners. For most of the nations, the burden of the tariff was on the higher end, and for some, it was relatively lower. India did attract a 26% tariff from the United States, which is comparatively lower than most of its Southeast Asian counterparts.

On  April 9th, an executive order was passed, with a 90-day pause on tariffs barring China. It was said to be an unwarranted move from the United States. The pause is introduced to resume negotiations with nations globally to reduce tariffs and renegotiate trade agreements. It has led to uncertainty about what to expect after the pause. Many business houses have stalled their expansion projects due to the uncertain climate created globally. No one knows what to anticipate since the tariffs impact the profit margins of many firms globally. This eats into the profit margins, making it difficult for businesses to think ahead.  The stock market has shown signs of high volatility, giving no clear signals to many investors. With a unilateral war against China, the US has shown how much damage it can inflict in terms of trade relations. However, the trade with other nations would continue with a baseline tariff of 10% till the 90-day pause.

The reasons for the pause are due to the change in the internal dynamics within the Republican Party. Not all showed support for the tariff schemes brought by Trump. The business houses and related lobbies showed a lot of resentment towards the tariffs since their products would now be relatively expensive.  Since many components are being used from many nations across the globe, now under the tariff scheme, the overall cost of the final goods produced would be higher, making it expensive to sell in the market.

Many economists globally at the start of 2025, posed a positive outlook. The global growth forecast has been downgraded by the IMF in the April edition, mainly due to the uncertainty posed by the tariff wars. The deal between Russia and Ukraine, too, remains to be seen if there would come to a peace agreement will come, with the help of the United States. The odds of a recession are still on the cards, and the probability is higher. With the projections ranging from 35%-45%, the outlook for the United States does not look good. This would probably hit the nations that depend on the US market for trade.

At the moment, nothing is certain about what can be expected from the negotiations with the United States. Many nations have opened channels for trade negotiations, which continue to be constant news. It remains to be seen if any concrete outcome comes of it. Globally, all the business houses are in a wait-and-watch mode, cautiously navigating the markets- a smart move. In the phase of uncertainty, we can only anticipate a positive move from the US administration- a new approach to tariffs. This could ease the world markets by creating a less volatile environment.