Dr Sudershan Kumar
In the interconnected world of the 21st Century, economic relations have often dictated the tone of diplomacy and global power equations. The world once heavily reliant on cooperation through multilateral platforms like the world trade organization (WTO), is now witnessing a sharp rise in protectionist tendencies most widely through tariff wars. These wars once centered around super powers like USA and China have now expanded to include other major economies such as India. India’s emergence as the fifth largest economy and a leader in the global South has drawn global attention. If the world or any major power enters in to a tariff war with India, it would not be just a bilateral tussle. It could set up off ripple effect that redefines global dynamics, alliances and economic structures. There fore it is utmost important to understand the tariff war, history beyond this , its impact on Indian economy and also the world order and future challenges. A tariff war is an economic conflict in which each country levies an additional tax on the other’s exports. Tariff war generally start when the leadership of one country is unhappy with trade partner’s trading behavior or for geopolitical reasons.
This war is in fact an economic battle between the countries, where they levy additional taxes on each other’s exports. This tariff war is designed to hurt other countries economically as tariff’s discourage the citizens of the importing country from buying the exporting country’s product by raising the total cost of those products. It is a well known fact that tariff wars are mutually destructive over the long run, though they might offer some short term benefits. Historically trade and tariff systems are closely tied for economic, nationalism, imperialism and later industrial protectionism. Such wars impacted global economic stability, disrupted supply chains and altered the trajectory of globalization. During Roman empires (200BC-400BCE), Rome imposed taxes on global goods like silk imported from china via intermediateries. During this period, the tariff imposition on foreign traders was quite common for revenue collection and regulation. Islamic empires (600AD-1100AD) levied duties on goods passing through trade hubs like Baghdad, Cairo, and Damascus. During the period of 1500 AD-1700AD, Mercantilism, a dominant economic theory in Europe focused building wealthy and powerful states through governmental control of economy. This system emphasized maximizing exports and minimizing imports, accumulating wealth in the form of gold and silver. Colonial powers like Britain and France heavily taxed colonial exports and imports. Navigation Act (1651-1849) was enforced by England to restrict colonial trade tariff conflicts especially with Dutchs and later on with Americans. In the year 1930 USA enacted Smoot-Haiely tariff act and raised tariff on 20,000 goods to protect farmers. This unilateral action of U.S. triggered global tariff war. Countries like Canada and European nations retaliated. This depend the great depression. As a result the global trade collapsed. The Smoot- Hawely tariff act 1930 is generally credited with severely exacerbating the great depression leading to an elections of Franklin D Roosevelt, who in 1934 signed the reciprocal trade agreement that reduced and liberalized trade with Foreign governments. It is not out of context to mention here that Donald Trump was one of the few Presidential candidate to speak about trade inequalities and tariff in 2016.
He vowed to take tough line against the international trading partners especially China to help American Blue -collar workers displaced by what he described as unfair trade practices. When he took office in 2017 his administration first targeted solar panels and washing machines. In March 2018 tariffs of 25% were added to imported Steel and 10% on imported Aluminum. During the first of tenure of Donald Trump, several countries were exempted but at the same time Trump announced that U.S. government would apply tariff $ 50 billion worth of Chinese import in 2018. That led back and forth tariff announcement and the Chinese retaliated in early April 2018 with 15% to 25% imports from USA. Donald Trump second term began with a broader and more assertive frame work, applying tariff not only as a economic levers but also a strategic tools, in negotiations on technology transfer, labour standards, and geopolitical alignment.
The scenario from 1 Jan 1 to Aug 11, 2025 depicts an administration eager to escalate tariff measures quickly. Key parameters specified are:- Universal Base Tariff (10% on all imports to create level playing field. Sectorial Tariff Escalations (additional 15 – 25% tariff on steel, Aluminium and electronic sectors) Country Specific Action List (China, Vietnam, Mexico, India are placed under review category). Energy and Green Tech Tariff (Tariff imposed on solar panels, Wind Turbine and EV batteries citing strategic industrial Independence). In this scenario, India finds itself in a nuanced position in this imagined tariff landscape. Unlike China, with which the US has an openly adversarial trade relationship. India is both strategic partner (in defence Indo -Pacific security and a competitive exporter in several high value sectors. Keeping this factor into consideration, India also started trade talks with U.S. Government on equal terms mutually beneficial to each other. After five round of negotiations (latest mid July, 2025) talks to finalize a Bilateral Trade Agreement (BTA) remained unfinished. This may be because of unreasonable demand by American government to push genetically modified agricultural products into Indian markets.
This was not at all acceptable to India. Because it would had seriously affected our farmers agricultural produce, dairy owners and fishermen. It is a well known fact that India is a Krishi Pradhan Desh” (India is an agrarians country). Significant portion of Indian population relies on agricultural for their livelihood. As a result USA has initially imposed 25% reciprocal tariff from 1st August 2025 and then doubled it to 50% in early August. This additional 25% serves as punitive response to India’s continued Russian oil import. This additional levy of tax on Indian goods seems to be totally unreasonable and can be considered as attack on over strategic autonomy. Present Indian Government decision not to buckle under any pressure is laudable . The 1.40 billions Indian must stand behind the Government to protect the interest of the country especially farmers dairy owners and fishermen. It is also true that India as an emerging economy and strategic player in Asia, is deeply affected by the global tariff war scenario.
The impacts are both challenging and opportunistic: (i) Export slow down:. India’s major export sectors textile, chemicals, electronics and auto components may face disruptions due to rising protectionism globally, ii) Tariff hikes on imports can also hurt Indian consumer. For example, increased duties on electronic components, crude oil, or fertilizers may lead to inflation, affecting household and small business. To respond strategically to the changing world order induced by tariff wars, India and other global players must adopt a multi-prong strategy. First, India must diversify both export destinations and import sources, reducing over reliance on one single country / market. Strengthening ties with ASEAN, Africa, Latin America and Eastern Europe can provide resilience; Second, strengthening of domestic infrastructure is absolutely essential. Initiatives such as Aattmanirbhar Bharat (Self reliant India) must be deepened. Investments in high tech sectors, skill development and ease of doing business are key to creating globally competitive industries. Third, push for WTO reforms. India should lead the voice of Global South in revitalizing multilateral trade institute, ensuring that rules are fair and reflect the interest both developed and developing countries. Fourth, partnering with neighbouring nations and friendly countries for becoming a hub for regional values is also the need of the hour. Fifth, India should invest heavily in research and development, intellectual property generation and digital infrastructure to reduce the dependence on imported technologies and become a tech power. The author is of the opinion, the rise in tariff war is not a temporary friction in global trade. It signals a deeper, systematic change in the way nations approach economic politics and diplomacy. The liberal rule based order, championed after world war-II is giving way to a more realistic fragmented and multi polar economic order, where national interest over rides collective global good.
While tariff war pose challenges to global stability, it also present new opportunities for a country like India. This is a strategic moment to reposition it self on the global map, both economically and geopolitically. The key lies in being agile, diplomatic and self reliant while building partnerships that ensure long term stability. It is also true that tariff war have the potential to change the new world order, but whether that leads to a more equitable or fractured world depends on the choices made by rising power like India. Navigating new path with clarity, caution and vision will determine not just national success but global harmony. There is also a caution for those, who are raising its tariff on imports and exports of goods unilaterally may face retaliatory action from other nations, which may prove detrirmental to their economies and the inflation may rise beyond their expectation. If this trend among nations continued it may lead to a precarious situation. As a result of this, in this tariff war among nations global trade may collapse and end up 1930 like situation of deep depression and collapse of world order.
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