We’ve been preparing for this ever since Trump’s election campaign in the US last year: higher tariffs across the board on all countries and all product categories. Now that it is here, the media cannot stop talking about it with its breathless reporting on the subject. No matter what type of media – newspapers, television news, business news, or online and digital news channels – it has been relentless since Trump took office in January this year.
Of course, higher tariffs are terribly important for economies around the world, especially those with a higher exposure to the US. And one can understand the nervousness and jitters that everyone, from markets and investors to business heads and customers, are feeling. What makes it worse is that there is so much policy uncertainty; Trump announcing a set of tariffs and then rolling it back or pausing it in order for countries to comply or negotiate with the US. But I think that we are now obsessing and fretting over it, at the exclusion of everything else. And I don’t wish to dwell on it in this column any more than I have already written about previously on my blog.
Like corporate earnings, for example. A new quarter has begun – for us in India, a new financial year has begun – and it’s time to focus on corporate earnings. Corporate earnings have been terribly slow this time in India, and even in the US and Europe, it’s Trump tariffs that seem to dominate the news reporting. It’s also time to pay attention to macroeconomic data, such as GDP growth figures for the major economies, as they announce them.
My concern is that the world is so consumed by the chaos that Trump has unleashed on us, that we are getting blindsided by it and losing our focus on other equally important economic issues.
First and foremost is the fact that governments need to work urgently on reducing their fiscal deficits as well as their debt levels. At the same time, economies need to reduce inflation, which is mostly trending down and this can only be good news. Higher tariffs with retaliation will bring on a wave of inflation and we need to be guarded against this.
At the same time, companies and businesses need to stay focused on corporate earnings right now and the prospects going forward. Remember, corporate earnings growth is what delivers the bulk of our GDP growth. China’s Q1 2025 GDP has just been announced a couple of days ago, and it has beat estimates, coming in at 5.4% when Reuters estimates were for 5.1%. What’s more, retail sales grew by a healthy 5.9% and industrial production grew by 7.7%, all better than estimates. A lot of the Q1 GDP growth must have come from exports, surging at 12% in March 2025 alone thanks to importers in the US and elsewhere advancing their orders in order to beat the tariff hike. Still, the fact that retail sales growth too was healthy means that the domestic economy seems to be on the mend, albeit slowly. Though could have been boosted by the Chinese Lunar New Year festivities which usually tend to see higher consumer spending.
Companies and countries also need to examine their supply chains and make necessary changes, in order to avoid the impact of higher tariffs. They also need to be vigilant against the flooding of cheap imports from China and other countries facing the highest tariffs, as the US market becomes more expensive for them. Countries – including India – need to have a plan to be able to manage this better through the rest of this year and beyond.
While they do this, countries must continue to engage better with their global partners and negotiate better and more on global trade. Engagement through multilateral fora as well as bilateral discussions must continue to take place. Right now, countries seem to be in a state of shock over the reciprocal tariffs – later paused by Trump for 90 days – though they must recover quickly and come up with viable and sensible plans for dealing with them.
Countries around the world must also stay focused on critical areas such as AI and tech adoption as well as climate change, and not allow any of this tariff hike to derail plans that are critical for sustainable economic growth and development. And international cooperation would be necessary in order to continue to make headway in these areas.
The international community and the world’s greatest powers must work harder to end both the wars that are raging in Ukraine and in the Middle East. I don’t think the ceasefire plans are working in either of the conflicts, and countries along with the UN must step up their efforts at ending the wars on an urgent basis. The longer it drags on without outside intervention, the more it favours the aggressors and more powerful countries, viz Russia and Israel.
And finally, both businesses and governments must work to protect the poor and economically vulnerable sections of the population from steep price rises arising out of the tariff and trade war. Companies need to plan price increases such that they don’t hurt the lower middle-class groups of consumers, else they might find their topline growth and volumes eroding. And governments also need to stay focused on investing in critical areas of social infrastructure such as education and healthcare.
A lot to concentrate on in the months and years ahead. But all our time and energies will be more effectively channeled if we remain focused on the most pressing and important issues. Prioritising the most important and urgent matters without allowing Trump tariffs to distract us will be key to solving even tariff-related issues.
I think it would make more sense for companies and governments to assume the worst-case scenario – that is that the reciprocal tariffs announced by Trump will go ahead – and then find ways to mitigate or minimize the risks. This includes negotiations, of course, and would be much better than waiting for any more clarity on tariffs which may never come, and losing time in the process. Reacting and responding to every bit of news flow on Trump tariffs can be quite wasteful, because it’s one thing one day, and another the next day.
And as I have been writing, diversify exports away from the US as much as you can; it’s perhaps the best way to minimize risks associated with tariff increases. It might take Trump a while to realise that the harshest effects of his new tariff regime will fall on American consumers and companies. He has not merely imposed the highest and punitive tariffs on China totalling 145%, but has been extremely harsh on smaller countries such as Vietnam, Cambodia and Taiwan as well. And then there are even higher tariffs on poor and developing countries in Africa, that are ridiculous. India has been spared somewhat, but we shouldn’t count on it. It can reverse in no time at all.
Because this is how Trump likes to operate, creating chaos and confusion everywhere. This puts him in the news all the time, day in, day out. But while he enjoys the media spotlight, can the rest of the world please get back to business?
The animated owl gif that forms the featured image and title of the Owleye column is by animatedimages.org and I am thankful to them.
Peripatetic Perch 