Tariff pe Tariff: Courting global trade war

Raju Korti
Remember the famous Bollywood dialogue, Tareekh pe Tareekh? Well, that's passé. The new global reality is Tariff pe Tariff. Nations are no longer just arguing over dates in courts; they are engaged in an escalating war of economic retribution, slapping tariffs upon tariffs in a tit-for-tat battle that is pushing the world toward a full-blown trade war.

The latest trigger has come from the US, where former President Donald Trump -- no stranger to economic brinkmanship -- decided to impose blanket 25% tariffs on steel and aluminium. Stung to the quick, the European Union (EU) and Canada immediately responded with countermeasures, imposing duties on billions worth of American goods. The EU's response alone matched the economic impact of the US tariffs, while Canada went a step further by mirroring the American levies "dollar for dollar." Even as other countries, including the UK and Australia, hesitated to retaliate outright, diplomatic warnings suggested that economic conflict was fast becoming the new normal.

It is obvious that this trade conflict is not merely about economic protectionism but about geopolitical posturing. The EU has framed the US tariffs as "unjustified" and "harmful to businesses and consumers." It is no surprise Trump's administration -- despite market jitters -- remains firm on its stance, seeing tariffs as a strategic tool to assert dominance. The result? Uncertainty in global markets, fluctuating currency values, and an overall risk-off sentiment that has driven investors toward gold and defensive assets. While the S&P 500 briefly rebounded, you do not need analysts to warn that the economic repercussions of this standoff could be far from over.

Now for my proverbial twist! While the world watches military conflicts brewing in Eastern Europe and the Middle East, another kind of war -- economic and financial -- is unfolding on a parallel track. Much like territorial disputes, trade conflicts have the power to reshape global alliances and fracture economic dependencies. The way NATO and Russia are locked in a military standoff, the US and the EU now find themselves on opposing ends of a trade battle. If history is any guide, economic wars have often been precursors to deeper conflicts, raising fears of a world hurtling toward an era of prolonged instability.

For India, a global trade war presents both risks and opportunities. On one hand, the slowdown in global trade could disrupt supply chains, increase costs of imports, and dampen exports, especially in key sectors like steel and aluminium. On the other hand, India could leverage the situation to strengthen trade ties with nations looking to diversify away from a US-China-EU-dominated supply chain. With strategic positioning, India might emerge as a preferred trade partner, benefiting from shifting global alliances and realignments. However, navigating this minefield will require deft diplomacy and a well-calibrated trade policy to ensure that India does not become collateral damage in the ongoing tariff battles.