Global markets are reeling from the escalating trade war sparked by President Donald Trump’s irresponsible rhetoric and unpredictable behaviour, harming even America’s staunchest allies. His erratic and unrestrained statements are sending shockwaves across the world, and no one seems to know which country or institution will be the next target. Stock markets across the world are reeling from shocks of his tariffs as much as his deranged statements and global trade is trying hard to readjust to the new normal of uncertainty.

The USA, China, and Canada are imposing tariffs on each other, sparking chaos in global markets. No country, not even India, whose trade volumes with the USA cannot be of much consequence to that country (2.7 per cent share of US imports and 2 per cent of US exports, in comparison with China’s share of 14 and 7 per cent respectively), can remain completely immune to the global turmoil that Trump is triggering. Now it is beginning to affect the US economy itself, raising fears about higher inflation and slower economic growth, loss of manufacturing jobs and weakening of the dollar, against Trump’s avowed objectives of a buoyant US economy, stronger dollar and jobs. His tariffs have sparked concerns that rising costs and trade disruptions could slow growth and depreciate the dollar.

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The Federal Reserve’s stand of no further easing of monetary policy has further stressed the dollar. On March 7, the US Dollar Index (DXY) had already declined to 103.9 from its peak of 110.0 on 13 January 2025, one week before Trump took over. Unpredictability of his policies and their broader economic implications are raising serious concerns about an impending recession, almost paralleling the Great Depression of the 1930s. Reports indicate that US consumer spending is already slowing because of rising prices of imported goods, and small businesses which contribute significantly to manufacturing are struggling with higher input costs. It is unlikely that the USA can sustain a prolonged trade war on all fronts for a long time.

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The Smoot-Hawley Tariff Act of 1930 ~ the legislation that significantly contributed to the Great Depression ~ offers some insights. Sponsored by congressional representatives Reed Smoot and Willis Hawley to protect American farmers and in – dustries by imposing high tariffs on imported goods, it has since become a case study on how protectionist policies can backfire and lead to economic isolation, pushing a country deeper into recession. Under that Act, USA imposed high tariffs on over 20,000 imported goods, sparking immediate retaliation from Canada, Britain, France and Germany. The results were........

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