Ashraf Engineer
September 6, 2025
EPISODE TRANSCRIPT
Hello and welcome to All Indians Matter. I am Ashraf Engineer.
Donald Trump’s assault on the global economy and, frankly on the US’ economic system itself, continues through the imposition of tariffs so high that trade is virtually impossible. This is in keeping with the US President’s unwavering commitment to protectionism. It’s not new; he’s always said what he thinks and he’s doing exactly what he said he would. It’s disastrous but I suppose you can’t accuse him of inconsistency.
In fact, there are videos of him from the 1980s in which he tears into trade liberalisation and alleges that Japanese companies are ripping off the US. You only need to substitute the word ‘Japan’ with ‘China’ today and you’ll find he’s saying the exact same thing.
This unshakeable commitment means that it no longer matters how much evidence there is against the effectiveness of tariffs. Trump will use them because he believes in them. Never mind that they shrink the US’ own competitiveness, are inflationary for Americans and will likely lead to job losses.
While protectionism may be working politically today, it will come up against geopolitical and economic reality at some stage.
SIGNATURE TUNE
Trump is now deeply invested in protectionism, which means he has little political room for a U-turn. It is very unlikely that he will abandon protectionist positions – even if it means bad news for the US economy, destroys relations with allies and results in trade wars.
The problem is that the tariffs will mean higher consumer prices for Americans. That will negate the extra money Trump’s tax cuts for businesses and consumers would have otherwise delivered. This means less money to invest and spend.
On India, specifically, the last round of tariffs were against the grain of the relationship between the two countries and wrecked the ongoing trade negotiations. While India’s purchases of cheap Russian crude oil serves its energy policy, Trump says it is fuelling the Russian war machine in the Ukraine. India is also a large buyer of Russian arms and other military equipment. Trump’s aides, meanwhile, claim that India is “the Maharaja of tariffs” when it comes to US goods.
It is also thought that Trump tried to use the higher tariffs as leverage in the trade negotiations with India but, with India refusing to yield, they were levied to pressure it.
Now it has emerged that so-called secondary sanctions tailored specifically to India may also be levied. Such sanctions were considered by the Joe Biden regime against various countries too but never actioned because of soaring inflation in the US and concerns about a rise in domestic gas prices. That is a problem Trump doesn’t have because global fuel demand is waning and there has been an increase in output by the Organization of Petroleum Exporting Countries. This has kept prices steady.
The other way tariffs hurt Trump’s domestic economic agenda is regulation. Trump is pursuing an intense deregulation agenda. One example of this is the effort to reduce the size of the government. While this will most likely hit critical services, even if you believe that it will free up economic activity, the impact of tariffs will negate the progress on that front.
Complicated tariff regimes increase the work of regulatory agencies, such as Customs, and the compliance effort of companies. What’s more, convoluted tariffs need higher government supervision of imports for an accurate assessment of duties. This means more inspections and audits. And that means employing more government employees, which is the exact opposite of what Trump wants to do. All this is anything but free-market economics.
Lastly, there is US GDP growth. I have already touched upon the impact of inflation and we all understand what it does to growth. Economic modelling by the Budget Lab at Yale University says that, in the long run, the tariffs will reduce the US’ real GDP growth by 0.4% annually. This may not sound like much to us in India, which regularly clocks between 6% and 8% growth but it’s off a much smaller base. The US, off a much larger base, clocks around 2% annually. So, a 0.4% reduction is actually 20% less growth. Over the years, that’s a lot of economic loss – especially job loss. Again, this is the exact opposite of Trump’s stated goal to create more jobs by reviving American manufacturing.
The impact is being witnessed already. About a month ago, the US Commerce Department released data showing that during the first half of 2025 GDP growth slowed sharply over last year. Businesses had ordered goods in large quantities before the tariffs took place and they distorted the GDP figures, showing the US economy contracting at an annualised 0.5% from January to March and then growing at, again, a distorted healthy rate of 3% between April and June. If you correct for the distortions, the US economy expanded at 1.3% during those six months compared to 2.8% for the same period in 2024. That’s a massive shrinking.
It’s no wonder that employers are putting off hirings. The employment report for June showed some weakness but the July report was damning. Leaving aside seasonal farm labour, 73,000 new positions were created – a smaller number than expected. Then came the revised estimates for May and June, which showed that job growth fell to under 20,000 in each month. That’s a virtual stop in job creation.
Trump responded in typical fashion, firing the commissioner of the Bureau of Labor Statistics, which publishes the report. He claimed that the figures had been rigged to make him look bad.
Another report showed inflation edging up to 2.6% in June, from 2.4% in May. The Federal Reserve’s target is 2% or under and it could point to a return of stagflation. That’s a situation in which inflation soars while the economy stagnates.
Many Americans are worried about what will come next – and who can blame them? The rest of the world, meanwhile, is slowly accepting the changing role of the US, from chief propagator of an open trading system to an inward-looking protectionist.
No economic policy is perfect. You always have some flaws, some contradictions. However, Trump’s wielding of tariffs is also creating an obstacle to the fulfilling of other major economic objectives. As and when the implosion happens, it won’t be pretty.
Persisting with this strategy will only undermine the solidity and credibility of the US economy, but it certainly won’t save Trump, the US and the rest of the world from the consequences.
Thank you all for listening. Please visit allindiansmatter.in for more columns and audio podcasts. You can follow me on Twitter at @AshrafEngineer and @AllIndiansCount. Search for the All Indians Matter page on Facebook. On Instagram, the handle is @AllIndiansMatter. Email me at editor@allindiansmatter.in. Catch you again soon.
