THE IMPACT OF US TARIFF POLICIES ON INTERNATIONAL BUSINESS
- Vinita Pathak
- Apr 15
- 6 min read
Ayaan Siddiqui, St. Xavier’s University Kolkata
INTRODUCTION
The global economic landscape has been dramatically reshaped by what economists are calling "the mother of all tariff wars." President Donald Trump's 2025 reciprocal tariff tsunami has sent shockwaves through international markets, creating winners, losers, and enough economic drama to fill a Netflix series. With an unprecedented 145% levy on Chinese goods and varying rates for other countries (including a hefty 26% on India), these tariffs represent the largest tax hike since 1993, amounting to a staggering $171.6 billion in federal revenue for 2025 alone.
TRUMP'S "MAKE AMERICA WEALTHY AGAIN" STRATEGY
Trump's obsession with trade deficits isn't new - economists note he's maintained this fixation for over 40 years. The administration claims these tariffs serve a threefold purpose: protecting domestic industries, addressing trade imbalances, and ensuring national security. But as Bill Reinsch from the Center for Strategic and International Studies bluntly put it, Trump fundamentally believes "the US is being ripped off" in global trade.
The revenue narrative has been central to Trump's public messaging. "You're going to see billions of dollars, even trillions of dollars, coming into our country very soon in the form of tariffs," Trump declared last week. According to Tax Foundation analysis, these tariffs will raise an astronomical $2.2 trillion over the next decade. Trump has suggested using this windfall to offset proposed tax cuts, even floating the radical idea of replacing income tax with tariffs entirely.
CORPORATE AMERICA'S TARIFF NIGHTMARE
For businesses deeply integrated with Chinese manufacturing, the tariffs have been catastrophic. Rick Woldenberg, CEO of Chicago-based educational toy company Learning Resources, saw his estimated tariff bill skyrocket from $2.3 million last year to a jaw-dropping $100 million for 2025.
"Honest to God, no exaggeration: It feels like the end of days," Woldenberg told AP.
MGA Entertainment, maker of L.O.L. and Bratz dolls, has been forced to slash orders and reduce Chinese sourcing from 65% to 40%. CEO Isaac Larian warned that some toy prices could double by the holiday season - Santa's sleigh is about to get a whole lot lighter and wallets a whole lot thinner.
CHINA'S MANUFACTURING DOMINANCE AND RESHORING REALITIES
The administration's push to bring manufacturing back to American soil overlooks a critical reality: China's overwhelming dominance in certain sectors. China currently supplies 97% of America's imported baby carriages, 96% of umbrellas, 95% of fireworks, and 90% of combs. That's right - even your hair care routine has been subsidized by Chinese manufacturing.
Joe Jurken of the ABC Group, which helps US firms manage Asian supply chains, stated it plainly: "American consumers created China. They got addicted to cheap pricing". This addiction won't be easy to break, as US infrastructure and labor markets aren't equipped to replace China's manufacturing capacity overnight.
INDIA'S TARIFF TALE: FIVE ECONOMIC EFFECTS
For India, the 26% tariff (which is mysteriously calculated higher than India's own 11.4% tariff rate according to WTO data) will have several profound impacts:
GDP Slowdown: An effective 20% tariff increase on Indian imports to the US could adversely impact India's GDP growth by 35-40 basis points, according to Standard Chartered Bank.
Pharmaceutical Reprieve: India's pharmaceutical sector, which contributes approximately $12.2 billion in exports to the US, received a last-minute exemption from tariffs - a significant relief for major Indian pharmaceutical companies.
Export Redistribution: According to UN economist Pamela Coke-Hamilton, export flows are significantly shifting from traditional markets like the US and China toward emerging economies including India, Canada, and Brazil.
FY26 Drag: Elara Capital estimates a maximum 40 basis points drag on India's FY26E GDP based on provisional calculations of the reciprocal tariffs.
Indirect Impact: Morgan Stanley predicts that beyond direct trade effects, weaker corporate confidence will dent risk appetite and further defer India's capital expenditure cycle, creating downside risk of 30-60 basis points to their growth estimate of 6.5% for FY26.
CORPORATE CASUALTIES: WHO'S PACKING UP SHOP?
The tariff tsunami has forced numerous companies to reconsider their China operations:
The Edge Desk: This furniture startup completely scrapped production plans in China and is now exploring manufacturing in Germany and Italy, despite higher costs.
Apple's Supply Chain Scramble: Apple, which produces more than 80% of its iPhones in China, saw its stock plummet 15% after the initial tariff announcement before securing partial exemptions. The tech giant is now racing to diversify manufacturing to countries like India and Vietnam.
Shield AI and Sierra Nevada Corporation: These defense contractors faced additional restrictions from China's retaliatory measures, potentially disrupting their supply chains despite having little direct business in China.
Skydio: This US drone manufacturer lost access to its Chinese battery suppliers after being sanctioned by Beijing in October 2024, demonstrating how quickly tariffs can sever crucial supply linkages.
THE CONSUMER'S BURDEN
The Yale Budget Lab estimates these tariffs will raise consumer prices by 2.3% on average in the short run, costing the typical US household roughly $3,800 in annual disposable income. Talk about inflation on steroids!
Economists project the tariffs will reduce after-tax income by an average of 1.3% per US household in 2025, amounting to a tax increase of nearly $1,300 per household. So much for those stimulus checks.
GLOBAL RECESSION RISK
Beyond the immediate impact on prices and supply chains, the tariff war threatens broader economic stability. According to UN trade official Pamela Coke-Hamilton, global trade could shrink by 3% due to these tariffs. JP Morgan analysts warn that the trade policy drag increases the prospect of recession, stating "we still think a contraction in real activity later this year is more likely than not".
THE ULTIMATE IRONY
Perhaps the most ironic aspect of Trump's tariff strategy is how it may actually backfire on his "America First" agenda. As Tax Foundation estimates show, these tariffs will reduce US GDP by 0.8% before foreign retaliation, and by a full 1.0% once retaliatory measures announced as of April 10 are factored in.
In the high-stakes poker game of international trade, it seems everyone might end up folding. As one economic wit put it, "When tariffs are the only tool in your toolbox, every trade issue looks like a nail." Unfortunately for the global economy, this particular hammer is proving exceptionally costly.
MAIN ARGUMENTS FROM TRUMP'S SUPPORTERS REGARDING TARIFFS
Supporters of Trump, as expected, defended his tariffs policies vehemently by stating their ability to defend American industries, cut down the trade deficit, and bolster national security. Here are the Trump Supporters key arguments:
1. Defending American Employment Opportunities
Supporters maintained that tariffs would prevent us industries from hem foreign competition. Gave to American consumers the incentive to purchase American goods and resuscitate manufacturing employment. Trump proclaimed, “Made in America is not just a tagline—it’s an economic and national security priority.”
2. Addressing The Issue of Unfair Trade
An overwhelming number of people thought of them as a necessity to defend against China’s alleged intellectual property theft, export subsidies, and currency manipulation them. A level playing field.
3. Elimination of The Trade Deficit
In 2024, The US trade deficit is estimated to exceed $1.2 Trillion. Supporters aimed at imbalanced trade imports and incentivized local production as a counter for inflow of goods from abroad.
4. Re-shoring Manufacturing
Using tariffs to compel foreign firms to move their manufacturing bases to the US posed an appeal from a job creation perspective, while also resolving the reliance on foreign supply chains.
5. Revenue Creation
Trump’s administration brought to the recent light that, with strategically done tariffs, safeguarding $171 billion annually is possible. This amount, according to his policies, is enough to fund the government spendings and reliefs on tax cuts.
6. Enhancing the National Security
During times of geopolitical conflict, U.S. sovereignty was considered undermined if foreign-made goods were relied upon for strategically important sectors such as defense and technology.
7. Means of Negotiation
Proponents characterized the tariffs as a means to secure better trade relations or other concessions from partners, such as stricter regulations for protecting intellectual property rights.
Statistical Evidence Supporting Their Arguments
In 2025, tariffs alone accounted for $171 billion in federal revenue.
After implementation, the trade deficit contracted by 12% YoY.
Due to re-shoring initiatives, manufacturing employment increased by 3% in Q1 2025.
CONCLUSION
In his effort to reshape global trade to create opportunities and challenges for countries, Donald Trump’s policies bolstered American manufacturing, as many claimed, while critics pointed towards the rise of consumer costs and disruption on a global scale. In this case, India was paired with mixed results—suffering setbacks in its technology and electronics industry while gaining more prospects in outsourcing and re-shoring.
The policies highlighted an important insight. In an interconnected economy, protectionist policies tend to have a boomerang effect, creating damage on a larger scale. As companies and countries embrace the new reality, the tariff chronicles illuminate the need for policies to blend strategic vision with practical realism. The saga of international commerce endures. However, the ability to adjust to new conditions is what truly matters in a fast-changing world.
Ayaan Siddiqui, St. Xavier’s University Kolkata
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