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Effect of Trump Tarrifs On US China and India Ishaan Batra

The document discusses the impact of the 'Trump Tariffs' on the US, China, and India, highlighting how these tariffs have negatively affected global markets and the US economy by reducing GDP and after-tax incomes. It suggests that while the tariffs aim to reduce dependence on China, they also create inefficiencies and hinder productivity in domestic industries. Additionally, the paper posits that India may benefit from these tariffs as American buyers seek alternative suppliers, potentially boosting Indian exports in various sectors.

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Ishaan Batra
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20 views2 pages

Effect of Trump Tarrifs On US China and India Ishaan Batra

The document discusses the impact of the 'Trump Tariffs' on the US, China, and India, highlighting how these tariffs have negatively affected global markets and the US economy by reducing GDP and after-tax incomes. It suggests that while the tariffs aim to reduce dependence on China, they also create inefficiencies and hinder productivity in domestic industries. Additionally, the paper posits that India may benefit from these tariffs as American buyers seek alternative suppliers, potentially boosting Indian exports in various sectors.

Uploaded by

Ishaan Batra
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Batra 1

Effects of “Trump Tariffs” on US China and India


~Ishaan Batra

The recent US imposed tariffs on all imported Chinese goods better known
as the “Trump Tariffs” have rattled the global share market, spreading
uncertainties and sending share prices crashing with ripple effects seen through
the Australian, Indian, Japanese and Canadian market indices.1 The aim behind
these tariffs according to Trump is to deter companies from doing business from
China and shift there industries back to The States increasing job opportunities
and flowing trillions of dollar in the US Economy ending reliance on China
President Trump’s America First trade policy will completely eliminate U.S.
dependence on China2.
An estimated effect of US tariffs on China will reduce there long run GDP
by 0.1% at the same time The threatened tariffs on Mexico, Canada, and China
would reduce after-tax income in the US by 0.8 percent in 2025 on average.
Factoring in how incomes would shrink further on a dynamic basis as tariffs
reduce US economic output, An estimated after-tax incomes would fall by 1.1
percent. Many Academic and governmental studies find the Trump-Biden tariffs
have raised prices and reduced output and employment, producing a net negative
impact on the US economy.3
Over time tariffs reduce the economic growth by discouraging competitive
markets and investment. The rise in price of imported goods leave consumers
with less disposable income, effectively lowering the after-tax value of earnings.
This decrease in purchasing power reduces incentives to work, leading to fewer
hours worked and lower capital investment. As a result, both the labour supply
and capital stock shrink, causing a permanent decline in overall output and
income.
Tariffs also create inefficiencies that hinder productivity. By shielding
domestic industries from competition, they weaken the pressure to innovate.
Instead of striving to improve efficiency and meet consumer demands protected
firms can rely on higher profits from government-imposed barriers. Historical
and ongoing examples suggest that such firms often use these profits to lobby for

1
Trading Economics
2
Trump 2025
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tax-foundation
Batra 2

extended protection rather than investing in research, development or capital


expansion. Furthermore, contributing to economic inefficiencies by fostering
political favouritism and increasing uncertainty in markets4
There is a gap requiring further research analysing the macro and financial
effect of a “Global 10% Tariffs on U.S. Import’s” and looking at the effects and
reactions of these from the perspective of the Asia-Pacific Markets with emphasis
on the Indian markets as-
China Imposed a 15% tariff on US coal and liquefied natural gas and 10%
on its oil and agricultural equipment in retaliation to Trump imposed tariff in the
mist of this brewing trade India is likely to gain impacting it’s exports positively.
In April-December FY25, India's goods exports to the US were around $60
billion and imports were $33.4 billion. Sources said that the US might act in
retaliation to China's tariff measures on certain products based on the reports of
the US trade representative and department of commerce.
As the tariffs raise the cost of Chinese goods in the US, American buyers
will look for alternative suppliers potentially turning to India. Key sectors that
could see a boost include electrical machinery, auto components, mobile phones,
pharmaceuticals, chemicals, and textiles.
Furthermore, the Indian government’s recent budget measures, including
customs duty reductions on various items such as motorcycles, satellite ground
installations, and scrap metals, could encourage American import. 5
This will further create a feedback loop with currency appreciation, and a
shock within the Indian industries with the increase in demand. Furthermore, this
will affect Indian imports of intermediate goods.
This paper will attempt to answer the big question analysing the net effect
of this trade war seeing who all will be the winners and who will lose by creating
a model to look at the long-time effect of this on the world economy.

4
tax foundation
5
Economic Times

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