1. Context:

• The editorial discusses the global impact of reciprocal tariffs announced by the U.S. under President Donald Trump, especially on developing Asian economies and India.
  
  
• It critiques how protectionist trade measures are being prioritized over economic logic.
  
  

2. Key Themes & Points:

A. Understanding Reciprocal Tariffs:

• Definition: A tax imposed by one country in response to a tariff placed by another country.
  
  
• Purpose: To correct trade imbalances, protect local industries, and preserve domestic jobs.
  
  
• Risks:
  
  
  • May lead to trade wars.
    
    
  • Higher costs for consumers, inflation.
    
    
  • Disruption of global supply chains.
    
    
  • Adds uncertainty to global trade and economy.
    
    

B. Impact on Global Economy:

• Post-announcement, crude oil prices dropped by 14%, reflecting fear of a slowdown.
  
  
• Could usher in slower growth, higher inflation, and economic fragmentation.
  
  
• Challenges for:
  
  
  • High-income countries: Have resources to retaliate.
    
    
  • Low-income countries: Disproportionately impacted, cannot respond effectively.
    
    

C. Targeting Asia:

• Many Asian countries, such as Vietnam, Cambodia, Thailand, Indonesia, and Malaysia, rely heavily on exports to the U.S.
  
  
• Their economic models—export-driven growth—face threats due to tariffs.
  
  
• Example: Vietnam’s garment exports heavily depend on the U.S.; similar risks to Philippines and Singapore.
  
  

D. Flawed Logic of Tariffs:

• S. calculation of trade deficits is goods-only, ignoring services like IT, banking, which benefit the U.S.
  
  
• This makes the basis of reciprocal tariffs questionable.
  
  
• Protectionism is replacing multilateral negotiations with unilateral decisions.
  
  

3. Implications for India:

A. Immediate Impact:

• India’s exports to U.S. may decline by $7.76 billion (6.4%) if tariffs are implemented.
  
  
• In 2024, India exported $89 billion worth of goods to U.S.
  
  

B. Strategic Response Required:

1. Balanced Trade Deal with U.S. through continuous negotiations.
   
   
2. Fast-track FTAs with EU, UK, Canada.
   
   
3. Deepen ties with Russia, Japan, South Korea, ASEAN, UAE.
   
   
4. Engage China on strategic and defence terms.
   
   

C. Potential Opportunity:

• India could gain from Apple’s diversification strategy (54% rise in iPhone exports from India).
  
  
• India’s total tech goods exports expected at $437 billion by 2025.
  
  
• But to benefit, India needs:
  
  
  • GST reforms,
    
    
  • Simplified trade procedures,
    
    
  • Stringent quality standards,
    
    
  • Stable policy orientation.

GS Paper II – International Relations

1. “Reciprocal tariffs signal a shift from multilateralism to economic nationalism.” In this context, examine the implications of rising protectionist policies by developed countries on India’s trade diplomacy.