The tariffs have escalated trade tensions between the U.S. and India, impacting bilateral trade relations. These tensions create uncertainty for businesses engaged in international trade. — Dr. Abhishek Pratap Singh

When the Trump administration first announced tariffs on steel and aluminium, it rattled global markets and set off a wave of concern. The delay announced on April 1st for countries like Europe, Canada, and Mexico brought relief, but that didn’t last long. The fact that such a dramatic move was needed says a lot about the confusion stirred by the President’s trade policies.

Uncertainty and Economic Risks 

The level of uncertainty triggered by Trump’s actions was something the global economy hadn’t seen in years. A stable trade system, built over decades, was replaced almost overnight with unpredictable decisions. Announcements came through social media, surprising even his advisors. With tensions rising between the U.S. and China, the unease spread fast.

Markets didn’t take it lightly. The S&P 500 dropped by around 15% after the initial tariff news. Bond markets also slipped, and hedge funds scrambled to cut their risks, which just made things worse.

Even the U.S. dollar,a currency investors usually turn to in uncertain times, lost ground. That showed how unsteady faith in the economy had become. There was a short bounce-back after the delay, but the rollercoaster left a mark. Nvidia, for instance, saw its value swing by over $430 billion in just one day following a trade-related update.

Despite the temporary tariff pause, underlying market anxieties persist. Treasury yields stayed high, and global markets didn’t climb back to their earlier peaks. And that made sense—tariff hikes were already happening. By January, the average U.S. tariff rate had risen above 2.5%, with more on the way, including those targeting pharmaceuticals.

What raised eyebrows was the administration’s tone. Officials claimed that foreign sellers would take the hit and that stock market drops only bothered rich investors. But in reality, a falling dollar usually means everyday goods cost more. That hurts regular families, shrinks what they can afford, and weakens overall spending. With markets jumping all over the place, consumer confidence was already fragile.

The bigger issue went beyond short-term jitters. Businesses need stability when deciding where to put their money. Organisations like the WTO had helped create that environment. Take China joining the WTO in 2001—just that one step boosted investor confidence and global trade. Some economists even said avoiding a trade war was like getting a 13% tariff cut.

Tariffs and Indian Economy 

The imposition of tariffs by the Trump administration has introduced significant complexities into the global trade landscape, with notable implications for the Indian economy. Here’s a breakdown of the key aspects:

The tariffs have escalated trade tensions between the U.S. and India, impacting bilateral trade relations. These tensions create uncertainty for businesses engaged in international trade. Certain Indian sectors, such as textiles, footwear, and agriculture, are particularly vulnerable to the tariffs.

There are concerns that the tariffs could negatively affect India’s economic growth. Financial institutions and economists have provided varying projections on the extent of the potential impact. The RBI has also stated that the tariffs have increased economic uncertainty.

The markets have shown sensitivity to the news of the tariffs, with notable fluctuations. The value of the Indian rupee has also been affected.India is having to consider how to navigate the shift in trade dynamics, including the need to diversify its export markets.

There is also pressure on India to reduce its own tariffs on goods imported from the U.S. The Indian government is pursuing diplomatic solutions and engaging in negotiations with the U.S. to mitigate the impact of the tariffs. The global trade environment is becoming increasingly complex, with protectionist measures affecting various economies. The situation is dynamic, and the long-term effects of the tariffs are still unfolding.

South Asia faces a tariff storm, but those who adapt—streamlining trade, diversifying markets, or leveraging competitive edges—might emerge stronger.

Despite global disruptions from new US tariffs, India could achieve its projected growth of 6.3%-6.8% for fiscal year 2025-26, provided oil prices remain under $70 per barrel, according to government officials quoted by Reuters.

Disputes with China

Trump’s approach turned that on its head. Ignoring trade deals, including some his own administration signed, made it harder for businesses to trust the system. Even if tariffs are removed later, the memory of this unstable period won’t disappear. It might shape how companies plan their supply chains or where they invest going forward.

In 2018, President Trump launched a trade war against China, imposing tariffs on $34 billion worth of Chinese goods. This move escalated tensions between the two nations, with China retaliating by imposing tariffs on US goods. The U.S. put 15% tariffs on goods from China, and China didn’t hold back—it responded with even steeper ones, going up to 84%. This kind of tit-for-tat made things riskier for both countries, especially since their economies are pretty closely connected. Trump’s tariffs contributed to downgraded GDP growth projections and rising expectations of a recession 

Trump said that “China wants to make a deal,” but that didn’t clear things up. The administration’s goals weren’t exactly clear, and that added to the uncertainty. For a long time, Western countries have raised concerns about how China runs its economy, things like government backing and subsidies. While that may not directly hurt the U.S., it’s fueled frustration, especially among workers who’ve lost jobs due to trade-related changes.

Instead of handling everything alone, the U.S. could’ve taken a smarter route by working with its allies. Countries like India might’ve even been strong partners in this. But that chance was missed.

In less than two weeks, global trade stability took a major hit. And while things may have calmed for now, rebuilding lost trust will take much longer. 

The author are teaches at Deshbandhu College University of Delhi.