What are Donald Trump’s ‘Liberation Day’ tariffs and what will be their impact on India? All you need to know

The world is bracing for US President Donald Trump's announcement of sweeping tariffs on "Liberation Day" – April 2. The reciprocal tariffs could upend the global trade system and shake financial markets.

The tariffs, aimed at boosting American manufacturing, could have major implications for corporate earnings, the global economy, inflation, and the Federal Reserve’s monetary policy.

‘Liberation Day’ and tariffs

For weeks, Trump has trumpeted April 2 as "Liberation Day", and White House spokeswoman Karoline Leavitt on Tuesday said reciprocal tariffs on countries that impose duties on US goods would take effect immediately after Trump's announcement.

Trump envisions the “Liberation Day” as a public holiday marking America’s break from dependence on imported goods.

Trump Tariffs:

The new tariff policy includes 25 per cent tariff on automobile imports, which would significantly impact countries such as Germany, Mexico, and Canada.

JP Morgan has estimated that tariffs of 25 per cent would raise new car prices by $4,000.

President Trump has argued that the step is needed to raise money and encourage domestic manufacturing.

The tariff measures are expected to generate around $600 billion per year in additional revenue for the US.

The US president has long argued that the deficit reflects “unfair” practices from US trading partners.

He sees it as a sign of weakness in the US economy after decades of factory production shifting overseas.

He has also used them as a negotiation tool to extract concessions from US trading partners.

Worries about the impact of an escalating global trade war on the world's largest economy and a slew of weaker-than-expected US data have stoked recession fears and, in turn, undermined the dollar this year.

Tariffs are border taxes that are charged on foreign imports. Importers pay the tariffs upon entry to the customs agency of the country or bloc that levies them.

The levies are typically charged as a percentage of a product’s value.

Impact on India 

Indian industry representatives and government officials are reportedly uncertain whether President Trump will proceed with his threat to impose reciprocal tariffs on its key trading partners.

A senior government official has told PTI that the domestic industry is "paranoid" and has been communicating with the government, seeking protection against the impacts of these tariffs.

Stakeholders are hopeful that America may defer its decision to impose reciprocal tariffs, as India is one of the few countries with which the US has decided to negotiate a trade agreement.