US President Donald Trump
| Photo Credit: AFP

US President Donald Trump announced plans Thursday for sweeping “reciprocal tariffs” hitting both allies and competitors, in a dramatic escalation of an international trade war that economists warn could fuel inflation at home.

Speaking in the Oval Office, Trump said he had decided to impose the reciprocal duties, telling reporters that US allies were often “worse than our enemies” on trade issues.

The levies would be tailored to each US trading partner and consider factors including value added tax (VAT).

Trump has announced a broad range of tariffs targeting some of the biggest US trading partners since taking office, arguing that they would help tackle unfair practices — and in some cases using the threats to influence policy.

The president has referred to tariffs as a way to raise revenue, remedy trade imbalances and pressure countries to act on US concerns.

Trump’s announcement came hours before he was due to meet Indian Prime Minister Narendra Modi in Washington.

It remains unclear when exactly the tariffs would take effect, if imposed.

Analysts have warned that reciprocal duties could bring a broad tariff hike to emerging market economies such as India and Thailand, which tend to have higher effective tariff rates on US products.

Countries such as South Korea that have trade deals with Washington are less at risk from this move, analysts believe.

Inflation concerns

Cost-of-living pressures were a key issue in the November election that saw Trump sweep to power, and the Republican has promised to swiftly reduce prices.

But economists caution that sweeping tariffs on US imports would likely boost inflation, not reduce it, in the near term and could weigh on growth eventually.

Trump’s nominee for commerce secretary Howard Lutnick, however, has pushed back on the idea that duties would cause widespread inflation, even as certain costs might rise.

Trump’s deputy chief of staff for policy Stephen Miller previously said countries use the VAT to get an unfair trade advantage, although analysts have challenged this characterization.

During election campaigning, Trump promised: “An eye for an eye, a tariff for a tariff, same exact amount.”

For example, if India imposes a 25-percent tariff on US autos, Washington will have a 25-percent tariff as well on imports of autos from India, explained a Nomura report this week.

The consideration of non-tariff factors might shift this calculus.

Modi will hold talks with Trump on Thursday and New Delhi offered some quick tariff concessions ahead of his visit, including on high-end motorcycles.

“Trump’s objective of implementing reciprocal tariffs is to ensure fair treatment for US exports, which could indirectly also address US trade imbalances with partner countries,” analysts at Nomura said.

Among Asian economies, India has a 9.5-percent weighted average effective tariff on US exports, while there is a three-percent rate on India’s exports to the United States.

Thailand has a 6.2-percent rate and China a 7.1-percent rate on US products, Nomura noted.

Higher tariffs are often imposed by poorer countries, who use them as a tool for revenue and protection because they have fewer resources to impose non-tariff barriers, Cato Institute’s Scott Lincicome earlier told AFP.

Washington:

Prime Minister Narendra Modi recently arrived in Washington, D.C. for a highly anticipated two-day visit to the United States. This significant trip marks his first visit to the U.S. since Donald Trump’s inauguration. Upon landing, Mr Modi was warmly greeted by members of the Indian diaspora who had gathered outside the Blair House to catch a glimpse of the Indian leader.

The excitement was palpable, with one young fan even donning a special “Made in India” dress to meet Mr Modi. The Indian diaspora in the U.S. is eager to see Mr Modi address pressing issues affecting their community, particularly those related to immigration. Many Indians in the U.S. are concerned about the renewal of work visas, since the possible termination of automatic work visa extensions may make it harder for skilled Indian workers to preserve legal status and continue employment.

In light of the ongoing tariff hike and illegal migrant issues, Mr Modi’s visit is seen as crucial in addressing these concerns. NDTV spoke with members of the Indian diaspora in the U.S. to gather their thoughts on what they expect from Mr Modi’s visit. The community’s expectations are high, with many hoping for clarity on immigration policies and stronger ties between India and the U.S.

During his visit, Mr Modi is expected to engage in discussions with U.S. leaders on a range of topics, including trade, defense, investment and technology. The visit is seen as an opportunity for India and the U.S. to deepen their cooperation and address common challenges. As Mr Modi navigates these complex issues, the Indian diaspora in the U.S. will be watching closely, hoping for positive outcomes that will benefit their community and strengthen ties between the two nations.

New Delhi:

Prime Minister Narendra Modi, who will be on a visit to the United States from September 21 to September 23 has a packed schedule. From the Quad Summit and UN General Assembly session, to holding multiple bilateral and courtesy meetings. He is also scheduled to meet top CEOs and business leaders and will also address the Indian community at a diaspora event in New York.

Ahead of the Prime Minister’s visit, former US President and Republican presidential candidate Donald Trump said he will be meeting PM Modi during his visit. The US goes to polls on November 5 and Mr Trump is currently campaigning across the United States.

Though Mr Trump has claimed that there will be a meeting between the two leaders, the Ministry of External Affairs today did not announce it as part of the Prime Minister’s itinerary.

When asked if PM Modi and Donald Trump will meet, the foreign ministry spokesperson said, “Many meetings are being fixed and the process is ongoing. At this moment we can’t confirm any specific meet. We are looking at it from various angles. If and When meetings are fixed and confirmed with any leader, we will update you all.”

While campaigning in Michigan on Tuesday, Donald Trump said he would meet PM Modi during his visit to the United States at the end of this week. He described Prime Minister Modi as “A fantastic man”.

“He (PM Modi) happens to be coming to meet me next week, and (Prime Minister) Modi, he’s fantastic. I mean, fantastic man. A lot of these leaders are fantastic,” Donald Trump said.

Speaking about Indians, Mr Trump said, “These people are the sharpest people,” but India imposes heavy tariffs on imports, “they are a very big abuser of tariffs.”

“They’re not a little bit backwards…You know the expression, they’re at the top of their game, and they use it against us. India is very tough. Brazil is very tough, China is the toughest of all, but we were taking care of China with the tariffs,” he said.

The United States is going to polls on November 5 and postal voting has begun in several states. Donald Trump, who is the Republican candidate and is seeking a second term in the White House, is up against Democrat candidate Kamala Harris, who is seeking her first term as President. Ms Harris is the current Vice President of the United States.

The most recent electoral polls suggest that Kamala Harris, who is of Indian heritage, is leading Donald Trump.

A new poll released today shows Kamala Harris with significant leads over Donald Trump in swing-states Pennsylvania and Michigan, two “blue wall” battlegrounds seen as key to winning the White House in November.

In the most latest poll of likely voters, Kamala Harris is leading Donald Trump 51 per cent to 45 per cent in Pennsylvania, and tops him 50-45 per cent in Michigan, two states in the post-industrial Rust Belt in the American Midwest and Northeast.