US President Donald Trump's sweeping implementation of tit-for-tat reciprocal import tariffs, beginning with a minimum 10 percent levy on nearly 60 countries, signifies a dramatic shift in American trade policy, extending beyond traditional trade disputes to encompass even long-standing allies.

Alongside this universal baseline, significantly higher, targeted tariffs have been slapped on major economies – including China (34 percent), India (26 percent), South Korea (25 percent), Japan (24 percent) and the European Union (20 percent) – as well as Southeast Asian nations, with Cambodia facing a particularly steep 49 percent rate. 

While framed as reciprocal, this layered approach risks triggering retaliatory measures and destabilising the global trade order, potentially leading to a widespread trade war.

On the surface, "reciprocal tariffs" seem to pursue fairness, ensuring that all countries bear equal tariff burdens in trade. 

The Trump administration has argued that other countries impose excessively high tariffs on American goods, leading to significant US trade deficits, and therefore, these reciprocal tariffs are necessary to balance trade.  

However, in reality, this policy is just a new tool for the US to implement trade protectionism, driven by unilateralism under Trump 2.0’s ‘America First’ strategy.

For starters, China's exports to the US may experience a certain degree of suppression. 

The US is one of China's major export markets, and the imposition of additional tariffs will increase the prices of Chinese goods in the American market, weaken the competitiveness of Chinese goods, and lead to a decline in export volume.

The dragon’s fire

But the world’s second-largest economy has already ringfenced itself from market shocks like Trump’s tariffs.

Due to the diversified development of China's export markets, in 2024, emerging markets contributed nearly 60 percent to China's foreign trade growth, which is an important force driving China's foreign trade growth and can, to some extent, buffer the impact of the US market. 

Experts believe that the diversification of Chinese enterprises has reduced direct reliance on the US market and that China's industrial chain is upgrading. Hence, the impact of this round of additional tariff policies on China's economy, corporate investment, and export confidence will be more moderate.

China's stock and currency markets have remained stable leading up to the "reciprocal tariff" implementation, with the RMB exchange rate steady in the 7.2-7.3 range and Hong Kong stocks rising around 20 percent since the beginning of the year. 

This demonstrates the resilience of China's economy and financial markets, enabling it to withstand the impacts of trade friction. 

However, this does not mean China can afford to be complacent. China needs to continue expanding overseas markets, boosting domestic demand, and promoting industrial upgrading.

China has already made its position clear. Recently, Foreign Ministry spokesperson Guo Jiajun stated that there are no winners in a trade war or a tariff war, and no country's development and prosperity are achieved through imposing additional tariffs. 

Trump’s actions violate World Trade Organization rules, damage the rules-based multilateral trading system and the common interests of people from all countries, and are also unhelpful in resolving its own problems.

The reciprocal tariffs will also affect US-India trade relations, particularly in the agricultural sector, where Washington seeks increased access for its corn, wheat, and cotton exports, aiming to narrow its $45 billion trade deficit with the world’s fifth-largest economy. 

While the US frames reciprocal tariffs as a means to level the playing field, India views them as a threat to its millions of smallholder farmers and its hard-won food security, having transitioned from food scarcity to surplus.

India's higher average tariffs on US agricultural goods, at nearly 38 percent, compared to the US tariffs on Indian products at 5.3 percent, mean that reciprocal application would disproportionately impact India, potentially flooding its markets with subsidised US produce and destabilising its rural economy. 

With Indian farmers cultivating less than one hectare on average, compared to over 46 hectares in the US, experts argue that direct reciprocal tariffs would devastate India's smallholder-dominated agricultural backbone. 

They suggest India must resist US pressure, prioritising its national interests and strategically negotiating, potentially offering concessions in other sectors to mitigate the risk of a trade war that could cost India billions in agricultural losses. 

What President Trump has lost sight of is the fact that tariffs are a double-edged sword.

Economists are warning that Trump's increased tariffs on imported goods will lead to significant price hikes on essential American purchases, including groceries, cars, and homes, a concern echoed by public sentiment which, according to recent polls, overwhelmingly views foreign trade as an economic opportunity rather than a threat. 

Public opposition to new tariffs is also evident, with a majority anticipating higher prices in the short term. Compounding these economic anxieties, manufacturing activity is showing signs of erosion, with companies reporting workforce reductions. 

Industries relying on imported components, such as electric vehicle manufacturers, foresee substantial cost increases, potentially adding thousands of dollars to their production expenses.  

Global shockwaves

The US "reciprocal tariff" policy will also have profound implications for the global multilateral trading system. 

For a long time, the US has extended most-favoured-nation treatment or more favourable tariff policies to developing and less-developed countries. The introduction of "reciprocal tariffs" means that this preferential treatment will be canceled, and all countries will face higher tariff rates from the US. 

This undermines the fairness and stability of the multilateral trading system, increasing global trade costs and uncertainty.

Many countries may take retaliatory measures and trigger a broader trade war, which will pose a greater downside risk to global economic growth. 

China has vowed to hit back against Trump’s “typical bullying” with unspecified countermeasures, while the European Union said it was already working on its response, as allies and adversaries alike reeled from his “Liberation Day” tariffs blitz. 

In the face of US "reciprocal tariffs," economies like China and India should take proactive measures. At the economic level, countries should strengthen internal reforms and enhance industrial competitiveness. 

China can accelerate the high-end, intelligent, and green development of its manufacturing sector, increase product added value, and reduce its reliance on the US market. 

India must increase support for key industries, improve agricultural production efficiency, reduce excessive concerns about agricultural imports, and minimise internal conflicts caused by fluctuating trade policies.

At the diplomatic level, countries should strengthen cooperation and jointly maintain the multilateral trading system. 

China, as a staunch supporter of the multilateral trading system, should continue to enhance communication and coordination with other countries, opposing US unilateralism through platforms like the World Trade Organization. 

India also needs to coordinate its position with other countries while safeguarding its own interests to avoid isolation in trade frictions.

Trump’s "reciprocal tariff" policy is a serious disruption to the global trade order, posing challenges to numerous countries. 

Countries need to maintain a clear understanding, actively respond, and mitigate risks by enhancing their own strength and strengthening international cooperation to maintain global trade stability and prosperity. 

The US should also recognise that trade protectionism cannot truly solve its economic problems. Only through equal and cooperative means can global trade development be promoted, achieving a win-win outcome.