U.S. Tariffs Under Trump: Implications for Global Trade

Context

Former U.S. President Donald Trump has announced a fresh round of punitive tariffs on imports, targeting pharmaceuticals, trucks, and furniture. These duties are set to take effect from October 1 and reflect the administration’s continued reliance on tariffs as a major trade and foreign policy tool.

Key Announcements

1. Pharmaceuticals:

   • 100% tariff on all branded drugs.

   • Exception: Companies already constructing manufacturing plants in the U.S.

2. Heavy-Duty Trucks:

   • 25% tariff to protect U.S. manufacturers like Peterbilt, Kenworth, and Freightliner.

3. Furniture:

   • 50% tariff on kitchen cabinets and bathroom vanities.

   • 30% tariff on upholstered furniture.

4. Reason Cited: Trump accused foreign countries of “large-scale flooding” of goods into U.S. markets.

Background and Legal Framework

• Trump’s earlier tariffs were justified under national security provisions (Section 232 of the U.S. Trade Expansion Act, 1962).

• Facing a Supreme Court case on the legality of sweeping tariffs, the administration is now relying on more established legal authorities.

• Tariffs have been central to Trump’s economic diplomacy—used to renegotiate trade deals, exert pressure, and extract concessions.

New Investigations (Probes)

The U.S. has launched multiple probes into imports of:

• Wind turbines, airplanes, semiconductors, copper, timber, critical minerals.

• Recently added: PPE, medical items, robotics, and industrial machinery.
  These may form the basis for future tariffs.

Reactions

• Pharmaceutical Industry: Warned tariffs could derail “hundreds of billions” in U.S. investment plans.

• U.S. Chamber of Commerce: Opposed truck tariffs since most imports come from allies (Mexico, Canada, Japan, Germany, Finland).

• U.S. Treasury Secretary: Projected tariff revenues of $300 billion by year-end.

Trade Deal Constraints

• U.S. trade agreements with the EU, Japan, and the U.K. cap tariff levels for certain products (autos, semiconductors, pharmaceuticals).

• Thus, new tariffs may not exceed agreed ceilings under these deals.

Economic and Strategic Significance

• Domestic Industry Protection: Seen as safeguarding U.S. manufacturing from “unfair competition.”

• Revenue Generation: Tariffs projected as a significant income source.

• Geopolitical Tool: Reinforces U.S. bargaining power in trade negotiations.

Global Impact & India’s Angle

• Global Trade Tensions: Could escalate disputes at the WTO.

• Pharma Supply Chains: U.S. imports a significant share of medicine ingredients from Europe and allies—disruption may impact global pharma flows.

• India’s Position:

  • India is a major generic drug exporter to the U.S. (less affected by branded drug tariffs).

  • Truck and furniture tariffs have limited direct impact on India but may open opportunities if U.S. diversifies suppliers.

  • Tariffs reflect a trend of “reshoring” manufacturing, which India must counter with its PLI schemes and trade diplomacy.

UPSC Mains Relevance

• GS Paper II (IR & Governance): U.S. trade policies, impact on WTO, and global trade order.

• GS Paper III (Economy): Trade protectionism, impact on supply chains, India’s export opportunities and challenges.

Practice Questions

Mains:

1. Discuss how U.S. tariff policies under Trump challenge the principles of the WTO and their implications for global trade.

2. How can India leverage the shift in U.S. trade policies to strengthen its pharmaceutical and manufacturing exports?

Prelims Pointers:

• Section 232 of the U.S. Trade Expansion Act relates to national security tariffs.

• Mexico is the largest exporter of heavy-duty trucks to the U.S.