Tariff Policy under Donald Trump: Global Ripples and India’s Stakes Author :  CA  A. K. Jain The tariff policy pursued by Donald Trump was framed as a corrective measure to reduce the United States’ persistent trade deficit and revive domestic manufacturing. Between 2018 and 2019, the U. S. imposed tariffs of 25% on steel and 10% on aluminium, followed by additional duties on Chinese imports worth over USD 360 billion, according to the World Trade Organization. The U. S. trade deficit at the time stood at around USD 870 billion in 2018, reinforcing the administration’s argument that aggressive tariff intervention was necessary to protect American industry and employment. Impact on Southeast Asia: Trade Diversion and Uneven Gains Southeast Asia emerged as a partial beneficiary of the U. S. -China trade conflict due to trade diversion. According to UNCTAD, ASEAN exports to the U. S. rose by over USD 70 billion between 2018 and 2022, largely at China’s expense. Vietnam provides a striking example: its exports to the U. S. increased from USD 49 billion in 2017 to over USD 114 billion by 2022, making the U. S. its largest export market. However, these gains were not cost-free. Rising wages, congested ports, and increased scrutiny from U. S. trade authorities have raised concerns that some Southeast Asian economies could themselves become tariff targets. India and U. S. Tariffs: Economic Exposure and Growth Risks For India, the United States is its largest trading partner, accounting for approximately 18% of total Indian exports. India exports goods worth about USD 77 billion annually to the U. S., including pharmaceuticals, textiles, engineering goods, and gems and jewelry. When U. S. tariffs on steel and aluminum were introduced, Indian steel exports to the U. S. declined by nearly 40% between 2018 and 2020. According to Moody’s, the imposition of broad U. S. tariffs could reduce India’s annual GDP growth by 0.2–0.4 percentage points, mainly due to export losses and reduced manufacturing investment. Are High Tariffs Beneficial for the United States? While tariffs provided short-term relief to select U. S. industries, broader economic data suggests net losses. A study cited by the World Bank estimated that the 2018–19 tariffs increased average U. S. household costs by approximately USD 830 per year due to higher prices. Research published by the Federal Reserve found that industries using imported inputs experienced employment declines, offsetting job gains in protected sectors. Overall, U. S. manufacturing output growth slowed from 2.6% in 2018 to near stagnation in 2019, indicating limited long-term effectiveness of tariff protection. Strain on Social and Political Relationships Trade tensions have also strained long-standing political relationships. The International Monetary Fund has repeatedly warned that unilateral tariffs undermine trust in the global trading system. In India and Southeast Asia, public and political discourse increasingly reflects scepticism toward U. S. trade reliability. Surveys conducted by regional policy institutes after 2019 showed declining confidence in the U. S. as a predictable economic partner, even as security cooperation remained strong. This divergence between economic and strategic relations poses long-term diplomatic risks. China’s Expanding Role in Southeast Asia and India’s Strategic Dilemma One of the most significant unintended consequences of U. S. tariff escalation under Donald Trump has been the accelerated deepening of China’s economic footprint in Southeast Asia. As U. S.-China trade tensions intensified after 2018, Chinese firms and policymakers redirected trade, investment, and supply chains toward the ASEAN region. According to data compiled by China’s General Administration of Customs and the ASEAN Secretariat, China overtook the United States to become ASEAN’s largest trading partner in 2020, with bilateral trade rising from about USD 587 billion in 2018 to over USD 975 billion by 2022. During the same period, China emerged as one of the largest sources of foreign direct investment in countries such as Vietnam, Indonesia, and Malaysia, particularly in electronics, renewable energy, and infrastructure. This growing economic integration has been reinforced institutionally through the Regional Comprehensive Economic Partnership (RCEP), which came into force in 2022 and now covers nearly 30% of global GDP and population. RCEP has lowered tariffs, harmonized rules of origin, and strengthened supply-chain connectivity across East and Southeast Asia, effectively anchoring China at the centre of regional trade architecture. According to the World Bank, RCEP could raise real incomes in ASEAN economies by up to 2% by 2035, with China capturing a substantial share of trade creation benefits. In contrast, the United States remains outside this framework, limiting its economic influence in the region despite strong security ties. For India, this shift presents a complex strategic dilemma. On one hand, U. S. tariff uncertainty and a fragmented global trading system increase pressure on India to diversify export markets and integrate more deeply with Asian supply chains. On the other hand, India’s economic engagement with China is constrained by long-standing geopolitical tensions, border disputes, and security concerns. Bilateral trade between India and China exceeded USD 135 billion in 2022, yet India ran a trade deficit of over USD 100 billion, intensifying domestic concerns over dependence on Chinese imports. As a result, India chose to stay out of RCEP, citing risks to domestic manufacturing and strategic autonomy. This has left India navigating a narrow path-seeking closer economic ties with Southeast Asia and the West, while cautiously managing its unavoidable economic relationship with China amid shifting U. S. trade policies. Implications for the U. S. Dollar and Global Confidence Despite trade tensions, the U. S. dollar initially strengthened during the tariff period, appreciating by nearly 8% on a trade-weighted basis between 2018 and 2020, as reported by the U. S. Federal Reserve. This reflected the dollar’s role as a global safe-haven currency. However, the IMF cautions that prolonged trade fragmentation could weaken long-term confidence in the dollar-centric financial system by reducing global growth and increasing systemic uncertainty. While no immediate alternative to the dollar exists, repeated trade disruptions raise questions about the sustainability of U. S. economic leadership. Are Southeast Asian Economies Prepared for Tariff Shocks? Southeast Asian economies today are better prepared than in earlier decades, holding foreign-exchange reserves equivalent to 6–9 months of imports in countries such as Thailand, Indonesia, and Vietnam. According to the World Bank, the ASEAN average public debt remains below 60% of GDP, providing some fiscal space to absorb shocks. However, smaller and less diversified economies remain vulnerable to sudden export disruptions. Preparedness, therefore, varies significantly across the region. Conclusion: A Policy with Economic and Strategic Trade-offs In conclusion, the pragmatic tariff policy associated with President Donald Trump has reshaped trade flows across Southeast Asia and India, delivering selective gains but significant systemic costs. While the United States achieved short-term bargaining leverage, the broader outcomes include higher domestic prices, strained alliances, and shifting regional power equations that have, in some cases, benefited China. The experience underscores a central lesson of global trade: tariffs may protect specific industries temporarily, but their long-term economic and geopolitical consequences extend far beyond national borders.   ---------------------------------------------------- Author of this article, C.A. Anil K. Jain( caindia@hotmail.com ) is a highly acclaimed Chartered Accountant with over four decades of professional experience. He is widely recognized for his expertise in financial and asset planning, taxation, international investments, and business growth strategies. Beyond advisory work. He actively contributes to national economic discourse through policy representations to the Government of India, frequent appearances on television and radio, and extensive writing. He is also the author of the acclaimed books Bharat: The Development Dilemma and River Water Recharge Wells, reflecting his commitment to India’s economic development and sustainable water solutions.