A tariff is a tax charged on the import of goods from foreign countries. Tariffs are used to generate revenue and as a protectionist measure, to shield domestic industries from foreign competitors. Tariff wars occur when nations escalate trade tensions by imposing higher tariffs in response to perceived unfair trading practices by another country.
Why is US starting a tariff war?
- US has typically charged lower tariffs than other countries.
- Now, US President Trump has claim that the global trading marketplace is unfair, and the US has been exploited by other countries for decades.
- Trump argues that the tariffs will boost the US manufacturing and protect jobs, as well as raising tax revenue and growing the economy. In a way Tariffs are central part of his economic vision.
US Tariff War – Canada, China and Mexico:
- The US has introduced a 25% tariff on all steel and aluminum imports from around the world. In response, the EU has said it will impose retaliatory tariffs on US goods worth € 28 billion, stoking fears of a global trade war.
- President Donald Trump has already imposed 25% tariffs on other imports from Mexico and Canada – with some exemptions – and a 20% levy on Chinese goods.
- On 11 March, he threatened to double the levy for Canadian metals because of country’s decision to charge more to electricity customers in 3 northern US states, in response to other US tariffs. Trump scrapped this plan just hours before it was due to take effect, after Canada agreed to suspend the extra energy charges.
US Tariff – India
- As per reports, the US has asked India to remove tariffs on nearly all goods except agricultural products before 2nd April or face reciprocal tariffs.
- The US is India’s largest trading partner, with bilateral trade reaching a record $118.2 billion in the last financial year.
- Last month, the two nations agreed to negotiate the first tranche of a mutually beneficial multi-sector Bilateral Trade Agreement (BTA) by the end of this year, with a long-term target of reaching $500 billion in bilateral trade by 2030.
Acknowledgements:
RBI Bulletin (www.bulletin.rbi.org.in), SEBI (www.sebi.gov.in), NSE (www.nseindia.com), BSE (www.bseindia.com)
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