Pushing the farfetched notion of replacing income-tax revenues with tariffs (custom duties), Donald Trump, during his 2024 Presidential campaign, advocated a massive increase in tariffs ~ 60 per cent tariff on China, 100 per cent on Mexico, and 20 per cent on all other countries. Right from his inauguration in January 2025, Trump has made tariffs the centrepiece of his Presidency ~ talking incessantly about tariffs in his interaction with world leaders, and inventing the verb ‘tariffed’ (equivalent to gassed) in the process.
If Trump is to be believed, high tariffs on goods being imported into the US would bolster US revenues, increase manufacturing activity, and also devastate economies of the countries being ‘tariffed.’ Following this strategy, on 2 April 2025, a day Trump called “Liberation Day,” Trump declared a national emergency and announced “reciprocal tariffs” on all countries that were not subject to other sanctions. A minimum tariff of 10 per cent on almost all US imports was imposed with effect from 5 April ~ raising the US tariff rate to 27 per cent ~ its highest level in over a century.
The US stock market crashed, which prompted Trump to halt the new tariffs for 90 days ~ except US tariffs on Chinese goods, which rose to 145 per cent. Following a zig-zag course, tariffs on Chinese goods were reduced to 30 per cent ~ giving the American public a new acronym, TACO i.e., Trump Always Chickens Out. Continuing in the same vein, on 30 July, Trump imposed an additional 40 per cent tariff, on top of a 10 per cent “reciprocal” tariff on Brazil, and on 31 July, Trump announced an extra 25 per cent tariff on India, making for a total tariff of 50 per cent.
September saw Trump impose 100 percent tariffs on pharmaceuticals, which is one of India’s primary exports to the US. Come October and Trump has threatened China with 155 per cent tariffs, and India with unspecified ‘massive tariffs,’ should it continue to buy Russian oil. The large fiscal switch, with Congress enacting humongous income-tax cuts, and the simultaneous imposition of increased tariffs on goods, have not panned out exactly as Trump wanted. True, tariff revenues have increased under Trump’s new tariff rates, reaching US$30 billion in August 2025, but considering a long-term budget window of ten years, tariffs could net about US$2 trillion in revenue, while tax cuts enacted in US Budget 2025, could cost the US treasury US$3.4 trillion.
Taking an immediate view, despite rising tariffs, US merchandise imports in the first half of 2025, have increased from US$1.899 trillion to US$2.091 trillion. The budget deficit went down slightly ~ from US$1.82 trillion to US$1.78 trillion. On the downside, gross Corporate Tax collections fell by 41 per cent, solely as a result of Trump’s so-called One Big Beautiful Bill Act. On the other hand, ‘devastation’ for the ‘tariffed’ economies, is nowhere in sight. The Chinese economy maintained its growth momentum, growing by 4.8 per cent in the June-September quarter. It is apparent that China has been successful in diversifying away from US markets; China’s US export sales were down 27 per cent, year-on-year, in September, but shipments to the European Union, Southeast Asia and Africa grew by 14 per cent, 15.6 per cent and 56.4 per cent, respectively.
The Indian economy has proved equally resilient; inflation has reduced sharply, and is at an eight-year low, while the Indian economy grew at a record 7.8 per cent in the first quarter, with an annual projected growth rate of 6.2 per cent for FY 2025-26. Doomsayers for the US economy, in the wake of Trump’s sky-high tariffs, have been proved equally wrong, there is no indication of the ruin forecast for the US economy ~ the predicted runaway inflation, sharp contraction, massive unemployment etc. are nowhere in sight. A restructuring of the US economy is definitely taking place, with negative distributional effects for the poor, but Trump’s rich friends are laughing all the way to the bank. Jean-Baptiste Alphonse Karr, a nineteenth century French critic once remarked: “The more things change, the more they remain the same,” which is a perfect description of the present world economic scenario.
Apparently, economists’ litany of high efficiency costs, negative political economy consequences, and the twin macroeconomic pressures of negative supply shocks ~ upward price pressures and reduced economic growth ~ were not sufficient to derail, or even affect the US economy significantly, which points to some biased economic analysis. The Cassandras, who had predicted near annihilation for Trump’s tariff victims, read Emerging Market Economies (EMEs), also had to eat crow. It would appear that (a) the motive behind Trump’s high tariffs was not mere economics, but a desire to prove American superiority, as a part of MAGA, which has antagonised most countries (b) high tariffs levied indiscriminately on all countries, made them discover alternate supply chains that excluded the US, (c) the press, controlled by plutocrats in EMEs, had a motivated interest in continued trade with the US, even at the cost of national interest and pride, so it painted a picture of economic doom in case Trump’s wishes were not honoured. Another significant failure of Trump is in his role as peacemaker.
Addressing the UN General Assembly, last month, Trump unapologetically declared: “Everyone says that I should get a Nobel Peace Prize” because “I ended seven un-endable wars in seven months,” which is perfidy at its worst ~ a white lie. Taking a look at the wars, that Trump claims to have ended:
1. The war between Armenia and Cambodia: These countries are located 6,500 kms apart. There has never been any war between them, in recorded history.
2. The war between Kosovo and Serbia: The war between these countries ended in the 1990s.
3. The war between Egypt and Ethiopia: Tensions simmer between Egypt and Ethiopia about reduced water flow in the Nile, as a result of construction of the Grand Ethiopian Renaissance Dam, but there has been no war, so far.
4. The war between the Democratic Republic of Congo and Rwanda: Trump claims to have ended the war by his mediation, but war continues on the ground.
5. The war between Iran and Israel: The US was an active participant on Israel’s side. The warring countries are more than 2,000 kms apart, both warring countries had substantially achieved their objectives, and further hostilities were unviable. So, the war ended, because it had reached a stalemate, and not because of Trump’s good offices.
6. The war between Cambodia and Thailand: Malaysian Prime Minister Anwar Ibrahim, in his capacity of Chairman of ASEAN, hosted Cambodian and Thai leaders in Kuala Lumpur, leading to cessation of hostilities. Trump’s claim of halting skirmishes between these countries, by threats of levying exorbitant tariffs, is without any basis.
7. The war between India and Pakistan: Despite Trump’s insistence on having ended the war, India consistently refutes Trump’s claim. However, Trump does deserve some credit for making Hamas and Israel agree to a ceasefire, and release hostages and prisoners. Though Trump has presented the ceasefire as a signal achievement ~ the eighth war that he claims to have ended ~ it is at best a fragile arrangement that does not address, let alone solve, the underlying Israeli-Palestinian conflict. Trump is a person who once said: “Sorry, losers and haters, but my I.Q. is one of the highest ~ and you all know it! Please don’t feel so stupid or insecure, it’s not your fault.” Any claims and statements by such a person have to be taken with a spoonful of salt, which is more than a charitable assessment of his self-declared achievements.
(The writer is a retired Principal Chief Commissioner of Income-Tax)