If Donald Trump’s ‘liberation day’ tariff trapeze has left you frustrated, you’re not alone. The reality of Trump’s reciprocal tariffs is so far from economic logic, we could already be living in a simulation. These are the harshest and most restrictive trade measures undertaken by any US administration in decades, disrupting trade liberalisation that had shaped the global economic order after World War 2.
All day on 2 April, numbers kept flashing across screens worldwide, displaying what is at best a ridiculous reciprocal tantrum, not an economic policy.
But how did the US come up with those numbers?
Reciprocal tariff chutzpah
One of the most astounding aspects of Trump’s reciprocal tariff strategy is the formula they have invented for getting there.
Secretary of Commerce Howard Lutnick’s team calculated tariffs based on the ratio of the US trade deficit with a country versus the total trade with that country. However, this formula is a measure of trade imbalance, not trade barriers. This is the first flaw in the strategy—a trade imbalance doesn’t inherently reflect trade barriers.
Trade imbalances exist between rich and poor countries as a natural outcome of global economic disparities. Wealthier nations generally have lower tariffs, while poorer countries tend to impose higher tariffs. This imbalance has little to do with trade barriers and everything to do with economic development levels. Former Swedish Prime Minister Carl Bildt aptly pointed out that low tariffs foster trade, and trade drives growth, which in turn creates prosperity.
The Trump administration’s misguided belief that applying a uniform “magic number” formula could somehow level the playing field fails to recognise these differences. If the goal was truly to address trade imbalances, reciprocal tariffs should have identified specific trade barriers contributing to disparities instead of using generalised numbers based on trade deficits.
Here’s an example: India is negotiating an FTA (free trade agreement) with the EU where market access is a thorny issue. Another problem is India’s misgivings around CBAM (Carbon Border Adjustment Mechanism), which will levy more tax on Indian steel and iron exports to the EU due to increased carbon leakage. Identifying this pattern, the EU has been making a case for unlocking climate financing for India to build technological advancement to prevent carbon leakage and address structural misgivings around a trade policy that is acting as a trade barrier.
In contrast, Trump’s tariff trapeze is tone deaf, calculated at a whim.
Also read: Trump is playing the ‘commitment game’. India must be smart, not surrender
Diplomatic theatrics
Trump’s reciprocal tariffs have more prologue and epilogue to make them into a bigger bluster.
The tariffs were halved for all countries from the list because the US, in Trump’s words, was “kind”. The president gave a 50 per cent discount on his magic numbers that anyway don’t reflect trade barriers. These are bizarre diplomatic theatrics.
However, just so others should not take America’s divine kindness for granted, Trump had already imposed a sweeping baseline of 10 per cent tariffs on virtually all countries. The reciprocal tariffs announced on liberation day with a 50 per cent discount, come over and above the 10 per cent already in place. And in cases like China, they add up to the previously existing tariffs, taking the score to unprecedented heights of economic self-delusion.
At this juncture, let us take a moment to reflect that all this addition to tariffs will finally be paid by the American consumers, not the MAGA cult. Despite this, Trump’s MAGA supporters have cheered on each nonsensical proclamation, sadly, at the expense of both the US and its partners. While the Trump administration claims these tariffs will punish foreign countries, the truth is that American consumers and actors across the supply chain will pay the price.
The immediate fallout from Trump’s tariff announcements was a dramatic sell-off in global stock markets. The S&P 500 plunged nearly 5 per cent, marking its worst single-day decline since the Covid-19 pandemic. In Asia, Japan’s Nikkei index dropped to its lowest level in eight months, and European stock futures also took a significant hit. Investors flocked to the safety of bonds and gold as economists warned that the long-term cost of these tariffs could exceed $30 trillion.
This economic turmoil was accompanied by a dip in Trump’s approval ratings, which fell to 43 per cent—the lowest since he took office. If the stock market continues to slide, it’s likely that his approval ratings will decline even further.
Trump’s Kremlin soft corner
The other detail that raises eyebrows for everyone is the exclusion of Russia from the list. Unlike what many would like to believe, going by misleading statements made by the USTR (United States Trade Representative) reps, the US-Russia bilateral trade is not zero because of Biden–era sanctions.
The US and Russia continue to have bilateral trade, although this significantly plunged from $35 billion before the Ukraine war to $3.5 billion now. The three main items on this trade list are nitrogenous fertilisers, radioactive chemicals, and uranium. The interesting bit is, Russia continues to have an export surplus with the US. And even if the uranium exports are given a waiver due to their sensitive nature, there is still room for putting “reciprocal tariffs”.
It is the same logic that the US has applied to other countries with far lesser or no trade. It has gone to bizarre levels, putting tariffs on its own military base in Diego Garcia and even on two remote Antarctic outposts inhabited by penguins and seals.
But there is more inconsistency. Countries like Syria that remain heavily sanctioned by the US are mentioned on the reciprocal tariff list, while other sanctioned countries like Russia, Belarus, and North Korea aren’t. Canada and Mexico are not mentioned yet because their negotiations are being done in a different framework.
The most glaring setback, however, is on ongoing efforts to build the resilience of supply chains. These tariffs fuel global dependency on China rather than creating conditions for diversifying away from it. For instance, Vietnam is now imposed with 46 per cent tariffs, which will have a bearing on investors that moved production chains from China to Vietnam for creating resilience.
Also read:
What about India?
From the beginning of Trump’s presidency, India has made several efforts to appease the US and avoid being caught in the crossfire of his tariff policies. The country has reduced tariffs on thousands of items imported from the US, valued at $23 billion. Indian companies have invested approximately $40 billion in the US economy. New Delhi has also promised to buy more American hydrocarbons and weapons, including military equipment like armoured infantry vehicles that it doesn’t necessarily need. These concessions were made in an effort to reduce the trade surplus that India currently enjoys with the US, which is about $45 billion.
In fact, going against the local automakers’ requests, India seems serious about cutting down tariffs on EVs because Trump wants it in the trade deal that both sides are now working on. This deal needs to close soon so it can be announced when the American president visits India for the Quad summit in October 2025. Despite these efforts, Trump’s tariffs have been unleashed on India, leaving it with little to show for its concessions.
India’s navigation of the chaos of Trump’s tariff game is compounded by its own economic shortcomings. While countries like Vietnam and Singapore have so far capitalised on shifting supply chains from China, India has failed to attract a meaningful share of this “diversified” investment. The complexities of India’s regulatory environment and uncompetitive ecosystem have made it difficult for the country to become a real investment destination. As a result, even as tariffs on China escalate, India remains far behind in terms of competitive manufacturing and foreign direct investment.
Silver lining
The key to India benefiting from the disruption caused by Trump’s tariffs lies in implementing internal reforms. Without structural changes to improve its manufacturing sector and efforts to make its sensitive industries more competitive, India will continue to fall behind in the global economic race. The government’s Production Linked Incentive (PLI) schemes, though promising, will not be effective on their own. They must be part of a broader effort to create a more investment-friendly environment. India’s ability to attract foreign investment will depend on its ability to simplify regulations, enhance infrastructure, and create a competitive business ecosystem.
Despite the challenges, there is hope for India to navigate this turbulent period. US Treasury Secretary Scott Bessent has advised countries to weather the storm and avoid retaliating against Trump’s tariffs. India’s measured response, which has been to avoid direct retaliation, shows a recognition of the need to stay focused on internal reforms. If New Delhi can successfully overhaul its sluggish economic ecosystem, it may be able to ride out the storm and emerge stronger in the long run.
Swasti Rao is a consulting editor at ThePrint and a foreign policy expert. She tweets @swasrao. Views are personal.
(Edited by Prasanna Bachchhav)