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In a development that goes far beyond trade disputes, U.S. President Donald Trump has taken a step that has shattered a 115-year-old record — a move that could prove self-destructive for the United States, especially when India is involved. The International Monetary Fund (IMF) and the World Trade Organization (WTO) have jointly issued a stern warning to Washington, cautioning that Trump’s sweeping tariff hikes could push the world back by decades.
The IMF and WTO fear that the highly interconnected global trade system, built painstakingly over decades, could crumble within months. Trump’s decision has driven America’s average tariff rate to 20.1%, the highest since the 1910s. The last time it touched this level was in 1990 — but the world was far less interconnected back then.
Trump’s trade war began in 2018 when he imposed tariffs on China, raising the average rate from 3% to 9%. While President Biden slightly reduced these barriers, Trump’s return to the White House in 2025 saw an aggressive escalation — tariffs reaching as high as 50–65% on a wide range of imports. No major economy has been spared — India, China, and Europe are all on the list.
India’s textile sector, already facing a 10% U.S. tariff, now confronts an additional 50%, taking the total to 60%. Steel, aluminum, and electronics have been hit hard. Notably, Trump has spared pharmaceuticals and petroleum products — a strategic choice to avoid domestic price spikes in the U.S.
Trump publicly claims on social media that billions of dollars will flow into America from countries that have “taken advantage” of it for years. In reality, this money will not come from foreign exporters but from U.S. consumers’ pockets. For instance, if an Indian product worth $1,000 is exported to the U.S., the tariff will push its price to $1,500. That extra $500 will be paid by American buyers, not by India. Essentially, these tariffs are a hidden tax on U.S. citizens.
Economists warn that this echoes the infamous 1930 Smoot-Hawley Tariff Act, which pushed U.S. tariffs to 20% and worsened the Great Depression. But in 2025, the consequences could be even more severe because the world is far more interconnected. The WTO and IMF are most concerned that other nations will retaliate with their own tariffs. This would fragment global trade into competing blocs, strengthening alliances like BRICS.
Such an environment could lead to unprecedented geopolitical shifts. Trump’s policies might even push India and China — traditionally rivals — to cooperate within new trade frameworks. The Global South, including countries from South America, Africa, and Asia, could unite to bypass the U.S. entirely.
The domestic U.S. impact has been swift. Prices have surged, forcing American consumers to pay more for essential goods. Industries heavily dependent on exports — such as aerospace and automobiles — are facing significant setbacks. As production slows and demand drops, fears of recession are growing.
India, meanwhile, is adapting quickly. It is actively seeking alternative markets in Asia, Africa, and Latin America to replace lost access to the U.S. market. Negotiations within BRICS are intensifying, with potential mega trade deals on the horizon. Recent high-level talks between Prime Minister Narendra Modi and Brazilian President Lula, as well as Russian President Vladimir Putin, signal a coordinated effort to expand India’s trade alliances. Modi’s planned visit to China adds another layer to this evolving strategy.
For the WTO, Trump’s approach undermines its mission of reducing trade barriers. For the IMF, the risk is clear: higher tariffs could trigger global economic instability and a prolonged slowdown. Both institutions see this as a turning point where decades of global integration could unravel.
In summary, Trump’s tariff policy is a double-edged sword — a risky gamble for America, but a strategic opening for India. It provides New Delhi with the chance to increase diplomatic pressure on Washington, lead emerging trade blocs, and strengthen the Global South’s economic influence. Trump may see himself as a master dealmaker, but this deal could cost him dearly, as India shows no intention of staying silent.
