While announcing the reciprocal tariffs, the President of the US announced country-specific new tariffs for more than 180 countries/ economies, with the imposition of a 10% baseline tariff.
- Announcement includes 26% reciprocal tariff on India—half the rate India imposes on US imports.
- Reciprocal tariffs aim to counter trade imbalances by imposing higher tariffs on countries with which the importing country runs a trade deficit.
- Similar reciprocal tariffs imposed on other major economies include China (34%), Japan (24%), the EU (20%), among others.
Reasons for Reciprocal Tariff
- Major reasons announced are reindustrialization and retaliation against unfair trade practices.
- It is a part of the backlash against hyper globalization and the rise of Economic Nationalism.
- Economic Nationalism is visible in manufacturing onshoring policies, Make America Wealthy Again promises, etc.
Economic Nationalism
- It is an economic ideology which favours domestic control of economy, labour and capital formation.
- Two form:
- Developmentalism: It uses industrial policy to shape national development goals. E.g., planned economic model adopted in India post-independence period.
- Mercantilism or isolationism: It seeks to increase the prosperity and power of a nation through restrictive trade practices. E.g., the recent US Administration’s America First policy.
