Since the 2008 financial crisis, the imperialist USA have relied heavily on debt-driven growth to sustain their economies. However, this strategy has reached a breaking point. As of February 2025, the US national debt has risen to $36.22 trillion, over 121% of its GDP. This alarming figure stems from two primary sources: a growing trade deficit and a persistent mismatch between government expenditure and revenue collection. In 2024 alone, the national debt increased by $2.35 trillion, with $918 billion of that due to trade deficit and the rest resulting from higher domestic spending.
Interest payments on this debt are becoming a major burden, surpassing even the US defence budget. During his 2024 presidential campaign, Donald Trump pledged to reduce this debt by imposing tariffs to reduce the trade deficit and cutting “wasteful” spending. However, at the same time, he promised tax cuts for the wealthy, which would only worsen the fiscal deficit. While he passed an executive order forming a “Department of Government Efficiency” headed by Elon Musk, its actions were limited to relatively small cuts and avoided major expenditure areas such as defence and tax concessions for the rich.
As a result, Trump has focused on the trade deficit as the main culprit for America’s economic woes. Since taking office, he has increased tariffs on key trade partners—initially targeting Canada, Mexico, and China. While tariffs on Mexico and Canada were eventually relaxed, those on China remained. Then, on April 2, Trump launched a sweeping and unilateral tariff regime on most countries, including India, effectively abandoning all previously accepted international trade rules, including those set by the World Trade Organization (WTO).
Trump has misleadingly branded these as “reciprocal tariffs,” claiming that any trade imbalance itself constitutes proof of unfair treatment. He uses a highly flawed formula that calculates the “implied tariff” on US products by dividing the trade deficit with a country by the volume of US imports from that country. He then imposes 50% of this so-called tariff as a real tariff on their exports to the US. For example, since India had a US trade surplus of $45.7 billion in 2024, Trump calculated a 52% implied tariff and imposed a 26% tariff on Indian goods.
The real motive behind this policy is to flood foreign markets with costly American goods. Trump’s administration has no genuine intent to bring labour-intensive manufacturing back to the US, as that would increase domestic prices and hurt corporate profits. Many Trump-aligned corporations rely on cheap labour abroad. Trump’s tariffs are designed to pressure countries into one-on-one trade deals, completely sidestepping the WTO, and making access to the US market conditional on increased imports of expensive American goods.
This approach is neither new nor sustainable. In the 1980s, the US forced Japan and Germany to accept a weaker dollar through the Plaza Accord to boost US exports. However, today the US no longer dominates global trade and production to the same extent. In 2023, China’s total trade stood at US $5.61 trillion, compared to the US’s $4.86 trillion. The US share in global trade is now just around 13% for imports and 10% for exports. Overplaying its economic hand could backfire, triggering further de-dollarisation and global resistance to US dominance.
China, the primary target, is far less dependent on the US than before. Since the 2018 tariff conflict, China has diversified its trade. In 2023, it exported over $1 trillion to ASEAN nations and $237 billion to Russia. US-China trade in 2024 was valued at $582 billion, with a US trade deficit of nearly $295 billion. China has shown greater resilience and a more strategic response to US measures than in the past.
India as expected is capitulating under
US pressure. Instead of challenging the imposed tariffs, the Indian government under Narendra Modi is continuing to bow before Uncle Sam. Even before the new tariff regime, India’s 2024–25 budget had lowered tariffs on US-favoured goods such as heavy vehicles, flavoured drinks, and solar panels. Since then, further reductions have followed, primarily benefiting US exporters.
Rather than standing firm, the Indian government is seeking a trade deal with the Trump administration—suggesting a willingness to make significant concessions. This includes accepting tariffs on major Indian exports such as electronics, gems and jewellery, textiles, and IT services. Pharmaceuticals are temporarily exempted, but future policy changes remain a threat.
Despite surrendering, the Modi government portrays the engagement with the US as strategic cooperation. It has invited US tech firms to relocate production from China to India and is trying to court Elon Musk for high-profile investments. However, the cost of such engagement is increased imports of expensive US goods, particularly in defence, agriculture, and high-tech sectors.
This will pose multiple challenges. US defence equipment procurement is not only costly but made complicated by India’s long standing military ties with Russia. The US will not allow interoperability with Russian platforms. More critically, increased agricultural imports from the US could devastate India’s already distressed farming sector, worsening rural debt and sparking popular resistance. Industrial sectors too will face pressure under such an arrangement. Ultimately, Modi’s closeness to Trump maybe good optics, but it reeks of surrender to imperialist policies. The real price will be paid by Indian workers, farmers, and common people.
