'No retaliatory tariffs now. You can retaliate after a few months. Today, there is no need to retaliate because it is a question of long term benefits.'
February 2025. Donald Trump threatened to impose 10% tariff on imports from all the countries including China.
Then the Trump administration imposed 20% tariffs on China, and in retaliation, the Chinese government imposed 15% tariffs on the United States.
The first trade war between the US and China was in 2018 when Trump was the US president.
In 2025, the trade war initially was not just against China but against the entire world including countries like Vietnam, Cambodia and Thailand. Vietnam and Cambodia have been hit by some of the highest tariffs: 46% and 49%. Further down are Thailand (36%), Indonesia (32%) and Malaysia (24%). The Philippines gets a tariff of 17%, and Singapore of 10%.
And it is 26% on India.
But it all changed on the 9th of April when Trump increased the tariff on China to 125% and paused the tariffs initiated against 75 countries.
China did not remain silent. It announced a retaliatory tariff of 85% against US imports.
On April 10, Trump said, it was not 125% tariff on Chinese imports to the US but 145%.
The trade war continues...
"You tell Trump that India undertakes to eliminate tariffs on 90% of industrial goods from day 1 provided the US did the same to India's goods. This will cover 90% of the US exports to India and that should solve the trade deficit and tariff problem," Ajay Srivastava, founder of the Global Trade Research Initiative, tells Rediff's Shobha Warrier.
The concluding segment of a must-read two-part interview:
- Part 1 of the Interview: 'Trump's Trade War's Main Target Is China'
So, who do you think will win in the second US-China trade war?
Of course, China will win. There is no doubt about that.
They won the first trade war, and they will win this trade war also.
Trump says the war is about trade deficit.
Then, if you compare the trade deficit from 2017 and 2023, it increased by $763.2 billion.
During this period, Chinese global exports increased by $1.1 trillion.
While US imports increased, so also did Chinese exports.
It is simple. China clearly won the first trade war.
You mean the same thing will happen this time also?
In a worse way, against the US.
I am hoping that all this drama will collapse in a few months' time.
In fact, it is already happening.
Giving a 90-day break for other countries from high tariffs suggests the US is putting up an effort to avoid international isolation while still appearing tough.
Despite the claims by the US that many nations are cooperating, major players like the EU, Canada and China have already retaliated, undermining the US narrative of global alignment.
Could this be because MAGA supporters have started feeling the pinch, losing millions of dollars in the stock market crash after 'Liberation Day'?
Ultimately, the citizens of a country will support the country as long as their pocket is not hurt too much.
Now, they find that the pocket has started pinching with an increase of 30% to 40% rise in the prices already.
Unlike Indians, Americans don't have the habit of saving. They spend everything they earn. With the rise in prices, they have to cut their expenditure. Naturally they are angry.
When Trump imposed high tariffs on India, why is there silence on India's part?
I am amazed. I am very pained too.
We are a large economy and we have to act like equal to the US like all trade partners are.
Like what China is doing...
Yes. China's response is like, if you insult me, I have nothing to do with you. Get lost!
There are two things India should do; one is reaction and then action. By reaction, I mean there should be a response saying whether it is good or bad. But there is no word from the Indian side.
Some senior people are saying, you buy more from the US and less from China. But that doesn't help.
There is no action also from India's side. Yes, it is a trade war and you can take a few months' time to act.
We believe that India is negotiating for a free trade agreement with the US. But FTA with the US will be a Costly Mistake.
Many of Washington's demands, such as weakening India's minimum price support system for farmers, allowing genetically modified food imports, lowering agricultural tariffs, changing patent laws to extend drug monopolies, and letting American e-commerce giants sell directly to consumers, will pose major risks.
It will harm farmer income, food security, biodiversity, public health, and the survival of small retailers.
Reducing tariffs on farm goods could affect the livelihoods of hundreds of millions.
Slashing duties on cars could undercut a sector that accounts for nearly a third of India's manufacturing output. The collapse of Australia's car industry after deep tariff cuts in the 1990s offers a cautionary example.
So, my suggestion is, you limit your FTA to zero-for-zero on 90% of industrial goods excluding sensitive items like cars.
You tell Trump that India undertakes to eliminate tariffs on 90% of industrial goods from day 1 provided the US did the same to India's goods.
This will cover 90% of the US exports to India and that should solve the trade deficit and tariff problem.
If the US accepts this, it could evolve into a WTO-compliant goods-only agreement.
India should stop offering unilateral concessions to the US as it is seen by Trump as "kissing my ass.
You mean, no retaliatory tariffs?
No retaliatory tariffs now. You can retaliate after a few months. Today, there is no need to retaliate because it is a question of long term benefits.
I would say, zero-for-zero is the best medicine for India right now.
Should India move in the same direction towards all the other countries too?
India is in a good position because we have already offered a zero tariffs for our FTA partners Japan, South Korea and ASEAN nations.
India should prioritize free trade negotiations with the European Union, United Kingdom, and Canada, and consider broader partnerships with countries like China and Russia.
How will this situation affect India's economy other than the weakening rupee?
India has deeper worries than Trump's tariffs.
We have to first focus on improving our production dynamics.
Our manufacturing share is going down, cost of production is high, value addition is going down, quality implementation is hurting small players, whatever government schemes that were helping the small exporters have been withdrawn...
Basically, our battle is more of an internal nature.
India has to make itself strong first. Only then, it can handle the external worries.
IMAGE: Ajay SrivastavaAs far as the trade war started by Trump is concerned, do you see sense prevailing in the near future?
Indications are coming already in the form of protests in the US, China standing firm, Trump pausing higher tariffs on 75 countries for 90 days, etc.
Trump's sudden policy shift seems to be a reaction to China's strong resistance to US demands.
By sparing other countries from higher tariffs, he appears to be avoiding a broader backlash.
This move looks more like political theatrics than a well-planned economic strategy, meant to project strength without triggering global isolation.
So, it is unravelling faster than we have imagined..
Feature Presentation: Aslam Hunani/Rediff.com
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