-->

Trump Delays Tariffs on Mexico and Canada, Escalates Trade War with China

Trump delays 25% tariffs on Mexico and Canada, preventing an immediate economic impact, but escalates trade war with China, prompting retaliation. Indian exporters see new opportunities as global supply chains shift.

 
Trump Delays Tariffs on Mexico and Canada, Escalates Trade War with China

In a last-minute decision, US President Donald Trump has postponed the 25% tariffs on Mexico and Canada, preventing an immediate economic impact on North American trade. The delay, announced just hours before the tariffs were set to take effect, has temporarily calmed financial markets, but the global trade war remains far from over.

China Retaliates Against US Tariffs

While Mexico and Canada got a temporary reprieve, Trump's trade war with China has intensified. Beijing responded to US tariffs by:

Launching an antitrust investigation into Google.
Imposing new tariffs on US coal, liquefied natural gas (LNG), oil, and agricultural equipment.
Slapping a 15% tariff on key American imports.
The situation has raised fears of further escalation, especially as Trump hinted at imposing tariffs on the European Union (EU) for its trade restrictions on American cars and farm products.

Trump’s Tariff Strategy and Its Global Impact

The US-China trade war began during Trump’s first term, resulting in a Phase One Deal in January 2020, which required China to buy more US goods and implement structural reforms. However, experts like Richard Baldwin from IMD Business School argue that China failed to meet these commitments, leading to renewed tensions.

The current US trade war has

Hurt US manufacturers by increasing production costs.
Encouraged trade diversions, benefiting India, Vietnam, and Taiwan.
Driven inflation higher, costing the average US household over $1,200 annually, according to PIIE (Peterson Institute for International Economics).

How India Benefits from US Tariffs on China

According to Oxford Economics, India ranked fourth in benefiting from trade diversions between 2017-2023 when Trump imposed tariffs on China. With new restrictions on Chinese goods, Indian exporters see a greater opportunity to expand in the US market, particularly in:

Textiles and garments.
Gems and jewelry.
Automobile components.
However, US inflation and economic slowdowns in America and Europe could reduce demand for labour-intensive Indian exports.

Why a Tariff War Creates a Domino Effect

Experts warn that Trump’s 25% tariffs on Mexico and Canada could hurt US manufacturing competitiveness, making American goods less attractive to buyers. Baldwin explained that US cars are assembled using parts from Canada and Mexico—making tariffs on these imports counterproductive. This could lead to:

Higher car prices in the US, forcing buyers to import more vehicles from Japan, Germany, and South Korea.
A supply chain disruption, affecting multiple industries.

While Trump’s last-minute decision to delay tariffs on Mexico and Canada has prevented immediate economic fallout, the US-China trade war has escalated, and potential tariffs on the EU could further destabilize global trade. For India, there are new opportunities in exports, but US inflation and supply chain disruptions remain key risks.

Tags

Share this story

Latest News

Must Read

Don't Miss