Decoding Trump's Reciprocal Tariffs
09 Apr 2025 16:09:56
The world is worried about higher US inflation & De-dollarization. Isn’t President Trump aware of this?
What’s the real reason President Trump imposed reciprocal tariffs against various countries?
Will the reciprocal tariffs create a new world order?
The Truth, the Wisdom, and the insight can only emerge from deep knowledge.
A shloka (verse) from Svetasvatara Upanishad, which is part of Yagur Veda and talks about glorious Rudra (Bhagwan Shiv) summarizes this fact beautifully.
Meaning – The naked eye, or the one amongst the five physical senses that possesses the ability to observe and see, yet cannot see, decipher or understand the complete truth, For Truth comes only from knowledge. That knowledge and insight are essential to know the deep-rooted truth.
It’s a known fact, until now and even today, that the United States of America, the leader of consumerism, capitalism and mecca of instant gratification and leader of materialism has the largest trade deficit (imports minus exports of the country), that reached a high of USD 1.1 trillion in 2023 and reduced to 914 billion USD in 2024.
The United States opened its markets and intelligently used this bait as a tool to influence and increase its influence on every matter, including financial, geo-political and social, by allowing countries to sell more in the US.
In addition to this, smartly, the United States moved the production of low value-added products to the rest of the World. Where high-end technology was required, their copyright and patents were continued to be owned by the companies in the United States, whilst the manufacturing or the execution the same (Outsourcing the Product creation, retaining the copyrights on technology) happened in other countries, ensuring higher margins, fewer challenges on the local soil and sustained profitability for US corporations for longer periods.
During the time, when the US was busy skimming the elite work, China took the leap and took over all so called redundant or low value jobs, but silently learning and recreating and the regrouping the technology through process redesigning thereby not violating the patent or the copyright.
Slowly and steadily, China started exporting from basic necessities like hand towels to high-end chips, creating a trade deficit for the US with ~ USD 295.4 billion in 2024, ~ 6% jump over 2023.
In other words, ~ 30% of the total trade deficit of the US is just created by one country exporting massive goods and services and then using the same money to push and nudge US down, militarily and technologically and financially.
The result is what one is witnessing today: Tariffs and Reciprocal Tariffs.
On 2nd April 2025, the President of the United States signed an executive order increasing the tariffs on all imports coming to the United States from ~ 57 exporting nations with a range of 11% to 50%, protecting the economy from dumped cheap goods, protecting the jobs of local people and reducing the trade deficit for its nation. The day he termed as Liberation Day.
President Trump has been a strong advocate, proponent, and backer of import tariffs, and in his previous term, he imposed tariffs on Chinese solar panels, washing machines to steel to aluminum from 5% to 50%. Quite a few of them got renegotiated and were brought down, whilst some of them remained intact through his term as well as Biden’s term.
Trump didn’t use Tariffs only for the economic protection of the country, as one can witness in the case of China, but sometimes to solve social issues as well.
The case in point is Mexico. May 30, 2019, President Trump then announced a 5% tariff on all products coming from Mexico, effective from June 10th 2019. He further announced that another 5% hike, in addition to freshly hiked tariffs, will take effect from 1st July 2019 and another 5% hike after 3 months, until Mexico ensures that it stops illegal migrants from infiltrating the United States. Mexico quickly responded, taking swift action on the illegal entry of migrants into the US and post negotiations, the tariffs were removed.
This time around, Asian Nations face the toughest task and bore the worst brunt of the Trump Reciprocal tariffs. With Cambodia at 49% additional tariff, Vietnam at 46%, Indonesia with 32%, Taiwan with 32%, Thailand at 36% additional tariff, China with 34% and Bharat with an additional 26% tariff.
The European Union, which has the lion's share of 18.5% in the US Imports, was levied a 20% additional tariff, whilst the UK was levied an additional 10% and Switzerland with 32%. The result of this is that most countries started to arrive on the negotiation table with the US.
China behaved differently. Instead of negotiating, it levied a retaliatory 34% import fee, and the outcome was grave. President Trump warned China of an additional 50% over and above 34% if China does not withdraw retaliatory tariff on the US goods sold in China. The US has imposed a 104% tariff on certain Chinese products, labeling China as the worst offender. In response, China has imposed an 84% tariff on certain American goods.
Though initial warnings and war of words were exchanged between the US and the neighbouring countries, on Mexico and Canada, no further tariffs were imposed. Earlier, on 2nd April 2025, Trump had imposed 25% tariffs on Mexico and Canada for not curbing migration and fentanyl trafficking but exempted USMCA (United States-Mexico-Canada Agreement) -compliant goods, giving a soft exit to both the countries.
These tariffs are surely harmful for the countries that are exporting to the US as it will increase the price of the end goods for the end customer, and that will, in turn, impact the purchasing propensity.
Furthermore, it can also harm the US economy as other countries may start putting (as has been seen in case of China) further reciprocal tariffs on the goods exported by the US like phones, Air crafts, machinery etc. reducing the demand in those countries for the US manufactured products and that can lead to lay offs in the US and possiblly leading to recession in the US.
Quite a few market players believe that if the cost of goods and services in the US due to tariffs go up, it will make goods and services more expensive for the US National and US citizen, stoking inflation.
In Feb 2025, inflation in the US stood at 2.8%, down from 3% in January 2025.
The Unknown
Can there be a larger motive behind tariffs and the trade War? Let's understand
Refinancing Public Debt
In 2019, the US economy was ~ USD 21.3 trillion, whilst the US National Debt was ~ USD 22.72 trillion (107% of the GDP).
Then COVID-19 struck the world, humanity came to a standstill, demand slumped, businesses got shut down, and the economy worldwide halted.
As per macroeconomics specialists, there are only two ways of reviving the economy – Employing Fiscal (boosting Capex) or monetary (boosting consumption) measures. Fiscal takes time to show impact and effect, whilst Monetary is instant.
Whilst Bharat chose fiscal measures by expanding the balance sheet and rebuilding Bharat and Bharat’s infrastructure, the US chose Monetary measures, giving cash doles to individuals, families and businesses.
The resulting demand for goods in the US surged as services couldn’t be consumed as yet due to COVID-19. As Covid receded, the demand for services also went up significantly, thereby pushing the average inflation of 2.4% (for the last decade) to a whopping 9.1% in June 2022 (~a 40-year high).
Moreover, to pay this cash, the US issued significant US debt (enhanced government borrowing) amounting to 4.1 trillion USD (~18% jump in government debt) in the single year.
Then, it didn’t pinch the economy much to borrow more as the US interest rates were cut to rock bottom with the Fed rate ranging between 0% to 0.25% and the 10-year US Gsec then trading at a yield ranging between 0.6% to 0.7%.
There comes the conundrum.
The US has been pushing the Can of borrowed money down the road, and the same has come to haunt it.
Between 2019 and 2024, the US economy grew from 21.3 trillion USD to 29.72 trillion USD, however, its Public debt jumped from 22.72 trillion USD to 36.218 trillion USD (122% of the GDP). Thus, in the last 5 years, the US economy grew ~ 40% in absoilute terms, the debt grew by ~ 60%.
Out of this 36.21 trillion USD, 28.9 trillion USD is external debt held by the public, whilst 7.29 trillion USD is intra-governmental debt held by various US government agencies and departments.
Of this 28.9 trillion USD Debt held by the public at large, including governments, institutions, sovereigns, individuals, HNIs etc, 7.6 trillion USD is coming to maturity in the next 12 months (25% of the US government debt held by the Public needs to be refinanced in the next 12 months).
As of Feb 2025, US foreign reserves stood at 35.6 billion USD and in 2024, the US fiscal deficit (Expenses minus Income of the government) stood at 1.8 trillion USD or 6.4% of the GDP.
The current 10-year to 30-year US Gsec is trading in between 4.15% to 4.625%, whilst the Fed rate (short-term rates) is at 4.50%.
If the US refinances the securities at such high interest rates (7 times higher than what was borrowed during Covid), the annual interest cost will be sharply higher every year for the next 10 to 30 years, and thus it’s not prudent to do so.
Thus, the game plan of the US.
Stoke the tariff war, choke the economy.
As the economy will slow down, cut the interest rates quickly to propel the economy back and borrow money at cheaper cost.
Furthermore, to rationalize the federal budget, the DOGE – Department of Government Efficiency has been laying off people. As of now, DOGE has laid off over 280,000 Federal Workers. The US economy grew by 2.8%.
If DOGE has to clean the system and lay off further excess fat, it’s easier with less hullaboo if the clean up happens in recession, than in a buoyant economy.
Political Funding
Lastly, most industrialists who will feel the pinch of Trump's Tariffs due to the levy of retaliatory tariffs by other countries had their allegiance with Democrats, thus nullifying their monetary prowess. Though in the bargain, some industrialists who are friends will also suffer, but the majority are the ones who opposed Trump’s candidature and supported Biden and then Kamala Harris.
As the tariff War and negotiations unfold, Bharat, at the moment, looks strong with its pole position.
As of March 2025, the total Exports of goods to the US from Bharat stood at ~ 90 billion USD, whilst Services Exports from Bharat to the US stood at ~385 billion USD. Two sectors, Information Technology that constitutes of ~ 54% of total services exports and Pharmaceuticals that comprise of ~ 10% of the total goods exports to US are free from any additional levies or tariffs (Though Trump has mentioned Pharmaceutical levies are coming. Imagine the plight of poor ailing Americans). A simple solution to this not so simple problem especially in case of Pharmaceuticals is ZERO for ZERO. In other words, Bharat removes all levies on the US drugs and the US to do exactly the same. Since cost, input and people efficiencies lie with Bharat, in a longer term, Bharat will emerge as a winner. This can also open door for joint research and partnership opportunities for Pharma companies. Lastly Bharat can approach WTO and get the exemption for essential drugs benefitting both the US and Bharat.
Some other sectors that will benefit from Trump's Tariff are
1. Textiles – The current US textile market is valued at ~ 189 billion USD and expected to be a 277 billion USD market by 2033, with Bharat exports to the US being merely 10.5 billion USD, less than 6% as of 2024.
With Trump levying a 26% tariff on Bharat and China, Bangladesh and Vietnam being levied 34%, 37%, and 46%, tariffs respectively, Bharat is staring at a very big opportunity to displace other Asian competitors in a large growing market.
2. EMS – Electronic Manufacturing Services where Trump has levied China (54 percent), Vietnam (46 percent), and Sri Lanka (44 percent) whereas Bharat has levies of 26%, thus Bharat can quickly gain the market share on account of tariff differential.
3. Diamonds – Bharat dominates the Diamond Trade of the World. Nearly 75% of the polished diamonds are exported by Bharat. By removing duties completely (ZERO FOR ZERO), on Uncut and Polished Diamonds, Bharat can help the ailing Diamond industry by freely importing raw uncut diamonds. Since the expertise lies intrinsically with Bharat, difficult for other countries to nudge Bharat in this trade.
The list is long, Whilst there would be some short term challenges of cost escalation to the end consumer and thus some demand reduction, this impostion of differential tariffs on different countries can be a big edge for Bharat to win in segments like Mineral Fuels, Apparael and clothing, Some specific Chemical products, and Iron and Steel Products.
Free Trade Agreement - Bharat and China are witnessing a Demographic Dividend, whilst the rest of the World is either aging or burdened with extremism and illiteracy.
China's Demographic Dividend will end by 2031, whilst Bharat's Demographic Dividend is expected to remain relevant till 2057. Most European and Middle Eastern nations were slow and skeptical in signing Free Trade Agreements (FTAs) with Bharat. The UK negotiated FTA for over 2 years and then dropped suddenly.
But Trump's move has given a fillip to these FTAs, with over 50 countries talking straight with Bharat to sign FTAs. Already, 13 FTAs are in place with various countries/ regions and 6 with limited coverage Preferential Trade Agreements (PTAs). UK has come back on the table discussing nuances of implementation of FTA with Bharat.
This change in World Order, driven by Tariff wars and China getting disjointed with the US and aligning itself with Turkey, Pakistan, Bangladesh, etc, gives a huge opportunity to Bharat to work with Global South, Europe, the Middle East and the US to expand its footprint economically, socially and spiritually.
Culturally, Asian countries like Cambodia, Vietnam, Thailand, Myanmar, the Philippines, etc, which are hit badly due to tariffs, are Sanatani for mellinia, and it's time that Bharat utilizes its deep inner knowledge and spiritual awakening to create a World, not a continent, that pursues the value and Principle of “Vasudhaiva Kutumbakam”.
What’s the real reason President Trump imposed reciprocal tariffs against various countries?
Will the reciprocal tariffs create a new world order?
The Truth, the Wisdom, and the insight can only emerge from deep knowledge.
A shloka (verse) from Svetasvatara Upanishad, which is part of Yagur Veda and talks about glorious Rudra (Bhagwan Shiv) summarizes this fact beautifully.
"न चक्षुषा दृश्यते सत्यम्, सत्यं ज्ञानम् यतो भवति"
Meaning – The naked eye, or the one amongst the five physical senses that possesses the ability to observe and see, yet cannot see, decipher or understand the complete truth, For Truth comes only from knowledge. That knowledge and insight are essential to know the deep-rooted truth.
The Known
It’s a known fact, until now and even today, that the United States of America, the leader of consumerism, capitalism and mecca of instant gratification and leader of materialism has the largest trade deficit (imports minus exports of the country), that reached a high of USD 1.1 trillion in 2023 and reduced to 914 billion USD in 2024.
The United States opened its markets and intelligently used this bait as a tool to influence and increase its influence on every matter, including financial, geo-political and social, by allowing countries to sell more in the US.
In addition to this, smartly, the United States moved the production of low value-added products to the rest of the World. Where high-end technology was required, their copyright and patents were continued to be owned by the companies in the United States, whilst the manufacturing or the execution the same (Outsourcing the Product creation, retaining the copyrights on technology) happened in other countries, ensuring higher margins, fewer challenges on the local soil and sustained profitability for US corporations for longer periods.
During the time, when the US was busy skimming the elite work, China took the leap and took over all so called redundant or low value jobs, but silently learning and recreating and the regrouping the technology through process redesigning thereby not violating the patent or the copyright.
Slowly and steadily, China started exporting from basic necessities like hand towels to high-end chips, creating a trade deficit for the US with ~ USD 295.4 billion in 2024, ~ 6% jump over 2023.
In other words, ~ 30% of the total trade deficit of the US is just created by one country exporting massive goods and services and then using the same money to push and nudge US down, militarily and technologically and financially.
The result is what one is witnessing today: Tariffs and Reciprocal Tariffs.
On 2nd April 2025, the President of the United States signed an executive order increasing the tariffs on all imports coming to the United States from ~ 57 exporting nations with a range of 11% to 50%, protecting the economy from dumped cheap goods, protecting the jobs of local people and reducing the trade deficit for its nation. The day he termed as Liberation Day.
President Trump has been a strong advocate, proponent, and backer of import tariffs, and in his previous term, he imposed tariffs on Chinese solar panels, washing machines to steel to aluminum from 5% to 50%. Quite a few of them got renegotiated and were brought down, whilst some of them remained intact through his term as well as Biden’s term.
Trump didn’t use Tariffs only for the economic protection of the country, as one can witness in the case of China, but sometimes to solve social issues as well.
The First Term Analogy
The case in point is Mexico. May 30, 2019, President Trump then announced a 5% tariff on all products coming from Mexico, effective from June 10th 2019. He further announced that another 5% hike, in addition to freshly hiked tariffs, will take effect from 1st July 2019 and another 5% hike after 3 months, until Mexico ensures that it stops illegal migrants from infiltrating the United States. Mexico quickly responded, taking swift action on the illegal entry of migrants into the US and post negotiations, the tariffs were removed.
This time around, Asian Nations face the toughest task and bore the worst brunt of the Trump Reciprocal tariffs. With Cambodia at 49% additional tariff, Vietnam at 46%, Indonesia with 32%, Taiwan with 32%, Thailand at 36% additional tariff, China with 34% and Bharat with an additional 26% tariff.
The European Union, which has the lion's share of 18.5% in the US Imports, was levied a 20% additional tariff, whilst the UK was levied an additional 10% and Switzerland with 32%. The result of this is that most countries started to arrive on the negotiation table with the US.
China behaved differently. Instead of negotiating, it levied a retaliatory 34% import fee, and the outcome was grave. President Trump warned China of an additional 50% over and above 34% if China does not withdraw retaliatory tariff on the US goods sold in China. The US has imposed a 104% tariff on certain Chinese products, labeling China as the worst offender. In response, China has imposed an 84% tariff on certain American goods.
Though initial warnings and war of words were exchanged between the US and the neighbouring countries, on Mexico and Canada, no further tariffs were imposed. Earlier, on 2nd April 2025, Trump had imposed 25% tariffs on Mexico and Canada for not curbing migration and fentanyl trafficking but exempted USMCA (United States-Mexico-Canada Agreement) -compliant goods, giving a soft exit to both the countries.
These tariffs are surely harmful for the countries that are exporting to the US as it will increase the price of the end goods for the end customer, and that will, in turn, impact the purchasing propensity.
Furthermore, it can also harm the US economy as other countries may start putting (as has been seen in case of China) further reciprocal tariffs on the goods exported by the US like phones, Air crafts, machinery etc. reducing the demand in those countries for the US manufactured products and that can lead to lay offs in the US and possiblly leading to recession in the US.
Quite a few market players believe that if the cost of goods and services in the US due to tariffs go up, it will make goods and services more expensive for the US National and US citizen, stoking inflation.
In Feb 2025, inflation in the US stood at 2.8%, down from 3% in January 2025.
Global financial markets, including the US, have been spooked with this event, assessing the immediate and long-term impact of these tariffs and the negotiations that will finally be unearthed in future.
Can there be a larger motive behind tariffs and the trade War? Let's understand
Refinancing Public Debt
In 2019, the US economy was ~ USD 21.3 trillion, whilst the US National Debt was ~ USD 22.72 trillion (107% of the GDP).
Then COVID-19 struck the world, humanity came to a standstill, demand slumped, businesses got shut down, and the economy worldwide halted.
As per macroeconomics specialists, there are only two ways of reviving the economy – Employing Fiscal (boosting Capex) or monetary (boosting consumption) measures. Fiscal takes time to show impact and effect, whilst Monetary is instant.
Whilst Bharat chose fiscal measures by expanding the balance sheet and rebuilding Bharat and Bharat’s infrastructure, the US chose Monetary measures, giving cash doles to individuals, families and businesses.
The resulting demand for goods in the US surged as services couldn’t be consumed as yet due to COVID-19. As Covid receded, the demand for services also went up significantly, thereby pushing the average inflation of 2.4% (for the last decade) to a whopping 9.1% in June 2022 (~a 40-year high).
Moreover, to pay this cash, the US issued significant US debt (enhanced government borrowing) amounting to 4.1 trillion USD (~18% jump in government debt) in the single year.
Then, it didn’t pinch the economy much to borrow more as the US interest rates were cut to rock bottom with the Fed rate ranging between 0% to 0.25% and the 10-year US Gsec then trading at a yield ranging between 0.6% to 0.7%.
There comes the conundrum.
The US has been pushing the Can of borrowed money down the road, and the same has come to haunt it.
Between 2019 and 2024, the US economy grew from 21.3 trillion USD to 29.72 trillion USD, however, its Public debt jumped from 22.72 trillion USD to 36.218 trillion USD (122% of the GDP). Thus, in the last 5 years, the US economy grew ~ 40% in absoilute terms, the debt grew by ~ 60%.
Out of this 36.21 trillion USD, 28.9 trillion USD is external debt held by the public, whilst 7.29 trillion USD is intra-governmental debt held by various US government agencies and departments.
Of this 28.9 trillion USD Debt held by the public at large, including governments, institutions, sovereigns, individuals, HNIs etc, 7.6 trillion USD is coming to maturity in the next 12 months (25% of the US government debt held by the Public needs to be refinanced in the next 12 months).
As of Feb 2025, US foreign reserves stood at 35.6 billion USD and in 2024, the US fiscal deficit (Expenses minus Income of the government) stood at 1.8 trillion USD or 6.4% of the GDP.
In simple layman's terms, the US as of now doesn’t have liquid funds to repay the debt, so the option left to the US is to refinance the same by issuing fresh debt securities.
If the US refinances the securities at such high interest rates (7 times higher than what was borrowed during Covid), the annual interest cost will be sharply higher every year for the next 10 to 30 years, and thus it’s not prudent to do so.
Thus, the game plan of the US.
Stoke the tariff war, choke the economy.
As the economy will slow down, cut the interest rates quickly to propel the economy back and borrow money at cheaper cost.
Clean Up by DOGE
Furthermore, to rationalize the federal budget, the DOGE – Department of Government Efficiency has been laying off people. As of now, DOGE has laid off over 280,000 Federal Workers. The US economy grew by 2.8%.
If DOGE has to clean the system and lay off further excess fat, it’s easier with less hullaboo if the clean up happens in recession, than in a buoyant economy.
Political Funding
Lastly, most industrialists who will feel the pinch of Trump's Tariffs due to the levy of retaliatory tariffs by other countries had their allegiance with Democrats, thus nullifying their monetary prowess. Though in the bargain, some industrialists who are friends will also suffer, but the majority are the ones who opposed Trump’s candidature and supported Biden and then Kamala Harris.
The Prospects
As the tariff War and negotiations unfold, Bharat, at the moment, looks strong with its pole position.
As of March 2025, the total Exports of goods to the US from Bharat stood at ~ 90 billion USD, whilst Services Exports from Bharat to the US stood at ~385 billion USD. Two sectors, Information Technology that constitutes of ~ 54% of total services exports and Pharmaceuticals that comprise of ~ 10% of the total goods exports to US are free from any additional levies or tariffs (Though Trump has mentioned Pharmaceutical levies are coming. Imagine the plight of poor ailing Americans). A simple solution to this not so simple problem especially in case of Pharmaceuticals is ZERO for ZERO. In other words, Bharat removes all levies on the US drugs and the US to do exactly the same. Since cost, input and people efficiencies lie with Bharat, in a longer term, Bharat will emerge as a winner. This can also open door for joint research and partnership opportunities for Pharma companies. Lastly Bharat can approach WTO and get the exemption for essential drugs benefitting both the US and Bharat.
Some other sectors that will benefit from Trump's Tariff are
1. Textiles – The current US textile market is valued at ~ 189 billion USD and expected to be a 277 billion USD market by 2033, with Bharat exports to the US being merely 10.5 billion USD, less than 6% as of 2024.
With Trump levying a 26% tariff on Bharat and China, Bangladesh and Vietnam being levied 34%, 37%, and 46%, tariffs respectively, Bharat is staring at a very big opportunity to displace other Asian competitors in a large growing market.
2. EMS – Electronic Manufacturing Services where Trump has levied China (54 percent), Vietnam (46 percent), and Sri Lanka (44 percent) whereas Bharat has levies of 26%, thus Bharat can quickly gain the market share on account of tariff differential.
3. Diamonds – Bharat dominates the Diamond Trade of the World. Nearly 75% of the polished diamonds are exported by Bharat. By removing duties completely (ZERO FOR ZERO), on Uncut and Polished Diamonds, Bharat can help the ailing Diamond industry by freely importing raw uncut diamonds. Since the expertise lies intrinsically with Bharat, difficult for other countries to nudge Bharat in this trade.
The list is long, Whilst there would be some short term challenges of cost escalation to the end consumer and thus some demand reduction, this impostion of differential tariffs on different countries can be a big edge for Bharat to win in segments like Mineral Fuels, Apparael and clothing, Some specific Chemical products, and Iron and Steel Products.
Free Trade Agreement - Bharat and China are witnessing a Demographic Dividend, whilst the rest of the World is either aging or burdened with extremism and illiteracy.
China's Demographic Dividend will end by 2031, whilst Bharat's Demographic Dividend is expected to remain relevant till 2057. Most European and Middle Eastern nations were slow and skeptical in signing Free Trade Agreements (FTAs) with Bharat. The UK negotiated FTA for over 2 years and then dropped suddenly.
But Trump's move has given a fillip to these FTAs, with over 50 countries talking straight with Bharat to sign FTAs. Already, 13 FTAs are in place with various countries/ regions and 6 with limited coverage Preferential Trade Agreements (PTAs). UK has come back on the table discussing nuances of implementation of FTA with Bharat.
This change in World Order, driven by Tariff wars and China getting disjointed with the US and aligning itself with Turkey, Pakistan, Bangladesh, etc, gives a huge opportunity to Bharat to work with Global South, Europe, the Middle East and the US to expand its footprint economically, socially and spiritually.
Culturally, Asian countries like Cambodia, Vietnam, Thailand, Myanmar, the Philippines, etc, which are hit badly due to tariffs, are Sanatani for mellinia, and it's time that Bharat utilizes its deep inner knowledge and spiritual awakening to create a World, not a continent, that pursues the value and Principle of “Vasudhaiva Kutumbakam”.
