US President Donald Trump's imposition of 25% tariffs on Mexico and Canada took effect on Tuesday, March 4, prompting retaliatory measures from Canada and escalating trade tensions on a global scale. Additionally, Trump announced on Monday that the US will increase tariffs on goods from China to 20%, up from the previously announced 10% in February.
This move has raised concerns of a potential trade war that could lead to higher inflation and hinder economic growth. In response, the Chinese Ministry of Finance revealed plans to impose 10-15% additional tariffs on certain imports from the US beginning March 10th. These tariffs will affect key American exports such as chicken, wheat, corn, and cotton, further intensifying the trade dispute between the world's two largest economies.
So how does that affect Indian investors? The Sensex and Nifty indices witnessed a notable decline at the opening of trading on Tuesday. This drop can be attributed to the negative sentiment in the global markets, the consistent outflow of foreign funds, and apprehensions regarding US tariffs.
Abhijit Chokshi, Founder of Stockifi.in, noted how the tariff hikes have sparked volatility in financial markets.
"The US is increasing tariffs to 20%+ on average - similar to Great Depression levels—and is threatening to impose a 100% tariff on BRICS nations. This isn't just a trade war; it's an economic earthquake that could shake your Portfolio," Chokshi wrote on social media platform X on Tuesday.
He noted:
1. The US is considering a 100% tariff on imports from BRICS nations—Brazil, Russia, India, China, and South Africa. That means prices for everyday goods could skyrocket overnight. Chinese electronics, Indian textiles, Brazilian coffee, Russian metals, and South African minerals—all could double in price.
2. Remember how inflation hurt your savings? This move could make it worse. Tariffs act like a hidden tax on consumers, and history proves it.
3. The Smoot- Hawley Tariff of 1930 worsened the Great Depression. Instead of helping local industries, it spiked inflation and crushed global trade. A 100% tariff on BRICS countries won’t just raise prices—it will also disrupt supply chains.
4. Tech giants like Apple and Tesla rely on Chinese components. A sudden tariff hike means production costs rise, leading to more expensive gadgets and potential shortages.
5. The auto industry will feel the heat too. Critical metals from Russia and South Africa—like palladium and platinum—are used in car manufacturing. Prices could surge. But this isn’t just about America. BRICS nations won’t sit idle. They have their own weapons—counter-tariffs.
6. China could strike back by restricting rare earth exports—critical for everything from iPhones to military equipment. Russia might tighten energy supplies, worsening fuel costs worldwide.
7. Brazil could target U.S. agricultural exports, hurting American farmers. The retaliation could lead to a global trade war, slowing down economic growth at a time when the world is still recovering from past shocks.
8. BRICS countries have been actively working to reduce their dependence on the U.S. dollar. This move will only accelerate that shift. They could increase trade in local currencies, sidestepping the dollar entirely. That would weaken America’s financial dominance over time.
9. India, a key US ally, might be forced into a tough spot—choosing between its economic ties with BRICS and its strategic partnership with the U.S. The bigger picture? This tariff war could reshape global alliances and permanently change how trade works. Are we ready for another inflation wave? Because that’s exactly where this road leads.
Tariff war
Reacting to Trump's latest tariffs, billionaire investor Warren Buffett said tariffs can be likened to an act of war. In an interview with CBS, Buffett expressed his belief that tariffs ultimately serve as a tax on goods, potentially leading to increased prices for consumers.
The 94-year-old, renowned for his investment prowess, highlighted Berkshire Hathaway's significant tax contributions over the years, emphasizing the economic repercussions of such actions. As Buffett stated, considering the long-term impacts is crucial in understanding the implications of economic decisions.
The recent implementation of new tariffs by President Trump marks a significant escalation in his trade policies, surpassing the economic impact of his entire first term. According to the Tax Foundation, the tariffs imposed in 2018-2019 caused a 0.2% reduction in US GDP. The latest tariffs on Canada and Mexico are expected to exceed this impact, with the group projecting a higher cost, even without considering potential retaliation and additional tariffs on China.
Erica York, the Vice President of Federal Tax Policy at the Tax Foundation, describes Trump's trade actions as an annual tax increase of $130 billion on American households. This could translate to an increase of $1,000 in costs per household.