NEW DELHI: In his latest move, US President Donald Trump has focused on industry-specific tariffs that other countries have imposed on American exports.
He slammed policies such as the European Union’s ban on US chicken, Canada’s dairy tariffs, and Japan’s levies on rice. These actions represent the most significant escalation of US tariffs in nearly a century, surpassing the effects of the Smoot-Hawley Act of 1930.
Trump’s approach is not to match the full tariffs imposed by other countries, but instead to apply what he described as "half-reciprocal" tariffs. For example, while the EU imposes a 39% tariff on US goods, Trump has set a 20 percent tariff on EU imports.
One of the most significant impacts of these new tariffs is on China. Already facing a 20 percent tariff due to its role in the fentanyl trade, China will now be hit with an additional 34 percent tariff, bringing the total tariff rate to a massive 54 percent.
This marks a substantial escalation in trade tensions between the two largest economies in the world, severely disrupting the flow of goods between them.
With China holding a trade surplus of $295 billion with the US in 2024, this shift is likely to have profound effects on both countries' economies.
Other Asian countries are not immune to the fallout from Trump’s tariff policies.
For instance, Vietnam, which has become a popular alternative for American manufacturers seeking to avoid tariffs on Chinese goods, will now face a 46 percent tariff. This increase could significantly raise costs for US companies in industries like apparel, furniture, and toys, potentially leading to price hikes for consumers.
Similarly, Cambodian goods will be subject to a 49 percent tariff.
These tariffs are particularly significant because they target nations that have increasingly integrated with China’s supply chain. As a result, there could be a further shift in trade patterns, forcing companies that once looked to Southeast Asia to avoid US tariffs on China to rethink their production strategies. This could ultimately benefit India.
India, in contrast, faces a 26 percent tariff under the new US policy.
While this rate is lower than the 34 percent tariff on China and the 46 percent tariff on Vietnam, it still places India at a disadvantage compared to some other Asian nations.
India’s tariff rate is also higher than those of countries like Japan (24 percent), South Korea (25 percent), and Malaysia (24 percent).
However, with companies looking for alternatives to China and Southeast Asia due to the escalating tariff war, India may see some benefits from these shifts. As businesses seek lower-cost manufacturing options, India could emerge as a more attractive destination for global supply chains.
The rising tariffs on China, Vietnam, and other countries signal a major reshaping of global supply chains. Retailers and brands that previously moved production to Vietnam to avoid tariffs on China will no longer be able to rely on the country as a safe option.
This could lead to greater diversification in global supply chains, and India could potentially benefit from this shift. With competitive labor costs and a growing manufacturing sector, India may become a more appealing option for production.
China, for its part, has already retaliated against earlier rounds of US tariffs by imposing its own duties on US imports, including agricultural products and fuels.
China's Foreign Minister Wang Yi warned that Beijing would "counterattack" if the US continues with its tariff strategy, emphasizing that "America First" should not harm the legitimate rights of other countries.
As the trade war between the US and China continues to escalate, the effects will be felt across the global supply chain.
While China has long been the top supplier to the US, Mexico surpassed China in 2023, making China the second-largest supplier. Imports from China to the US in 2024 totaled $438.9 billion, while imports from Vietnam surged by 19 percent, reaching $136.6 billion in the same year.
