US Imposes Tariffs

February 3, 2025

Recently, the US President Trump imposed a 25% tariff on Canada and Mexico and a 10% tariff on China, which affects the US’s top three trade partners. This is part of his protectionist trade policies, aimed at reducing the US’s $1 trillion trade deficit.

About Trade War

A trade war is an economic conflict where countries impose tariffs or restrictions on each other’s imports in response to perceived unfair trade practices.
They can be used to protest against a country’s policies or to protect domestic industries from foreign competition.
If a country cannot produce enough goods domestically, imposing high tariffs on imports can backfire, making essential goods more expensive for citizens.

Why did US impose tariffs?

It sought to curb the flow of drugs and undocumented immigrants into the US.
The tariffs are expected to risk increasing prices for American consumers across an array of goods such as sneakers, avocados and cars.

Retaliatory Responses

Canada, Mexico and China are the US’ largest trading partners. They account for one-third of all US imports.
Canada responded with a 25% retaliatory tariff on US-made products
Mexico announced its intention to take a similar step.
China is also expected to impose retaliatory tariffs

US Trade Deficit

China contributes the most (30%) to the US trade deficit, followed by Mexico (19%) and Canada (14.5%). India is the ninth-largest contributor, making up 3.2% of the US trade deficit

India’s Tariffs

India has started reducing tariffs on products mostly exported by the US, like motorcycles and satellite parts, to avoid being affected by US tariffs. These changes were made in India’s Union Budget for 2025-26.

Key Indian Exports to the US

India has a trade surplus in pharmaceutical products, gems and jewellery, and seafood. If US tariffs target high-value items, these sectors may be affected.

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