Tariffs, Borders, and Power Play: Trump's Economic Hammer against issues that matter
The Global Ripple Effect of Fighting Illicit Drugs and Illegal Immigration
Illegal migration is talk of the Trump-town and,
that’s why President Trump is making bold moves again, just like when he imposed tariffs on China in 2018 to counter its (alleged!) unfair trade practices.
This time, it’s all about illegal immigration and the deadly fentanyl crisis. In 2022, a staggering 2.2 million migrants tried to illegally cross into the U.S. under Biden’s leadership. Mind you, 2.2 million is like the entire population of New Mexico trying to cross the border! But even more shocking, fentanyl claimed nearly 74,000 American lives that year, surpassing the total U.S. casualties from the entire Vietnam War!
To combat illicit drugs flowing, and illegal border crossing, Trump pulled out a huge economic hammer- tariffs. He is slapping a 25% tariff on imports from Canada and Mexico and a 10% tariff on China.
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This is making the headlines because, of course!
But to take the deeper dig - when tariffs go up, the cost of imported goods rise, meaning businesses have to pay more for materials and products. To cover these costs, they either raise prices for consumers or cut jobs to stay profitable. In a retaliatory move, these countries may hit back with their own tariffs, making it harder for American companies to sell products abroad too. Additionally, American consumers may face higher prices and inflation could rise. This cycle can slow down the economy, make things more expensive, and create uncertainty in markets.
So, the battle is on!
Here is all you should know.
Why Fear Tariffs?
If you are planning to skip this section thinking you know it all from your high school economics, you better stay because this is an exhaustive guide to understanding your tariffs.
Tariffs impact all of us in ways we might not realize. Imagine I’m running a small business that imports electronics from another country. One day, the government announces a new tariff, basically, a tax on these goods, making them more expensive to bring in. Suddenly, my costs will go up, and I have two choices: either raise prices for my customers or find a cheaper alternative. Either way, someone loses.
Governments impose tariffs for a few reasons. Sometimes, they want to protect local businesses from foreign competition by making imported goods more expensive. This is called a protective tariff. The U.S. did this in 2018, when it put tariffs on Chinese steel and aluminum to protect American manufacturers from cheaper Chinese imports, which were flooding the U.S. markets at that time.
Other times, governments use tariffs to generate revenue, just like taxes. While this sounds reasonable in theory, tariffs often create ripple effects and that's where the real power politics lie. For example, if a country like the U.S. imposes high tariffs on steel imports, local manufacturers might benefit because their competitors from abroad are now at a disadvantage. But industries that rely on steel like car manufacturers will now face higher costs, which they’ll likely pass on to consumers in the form of more expensive cars. This means that while some businesses win, others (ultimately the people) lose.
Too Fin to know! Before income tax was introduced in 1913, tariffs were the primary source of federal revenue, covering almost 90% of government expenses in the 19th century!
Not all tariffs work the same way. A specific tariff is a fixed tax on each unit of an imported good, like ₹ 500 on every imported laptop. An ad-valorem tariff, on the other hand, is a percentage of the item's value, like a 10% tax on every imported car. Some tariffs combine both, adjusting automatically as prices fluctuate.
Tariffs also vary depending on whether the country applying them has market power. A small country, one that doesn’t significantly affect global trade, usually suffers from tariffs because they just make goods more expensive without influencing global prices.
Final verdict! The reality is that tariffs are a double-edged sword. They can protect domestic jobs and industries, but they can also make everyday goods more expensive. When used wisely, they can pressure foreign countries to change trade policies or level the playing field. But if overused, they can lead to higher costs for businesses, strained diplomatic relations, and even global economic instability. The key is, philosophically enough, balance! That’s why governments constantly adjust tariff policies, trying to strike that perfect equilibrium between protection and economic efficiency.
Trump is Acting
Using tariffs as an economic weapon, Trump is acting harshly against some of the nations.
Let’s start from here. Imagine you’re stuck in a place where jobs are scarce, wages are too low to support your family, and you know that just across the border, people doing the same work make three or four times as much. Wouldn’t you at least think about making that journey, even if the paperwork wasn’t in place? The cartoon below conveys this clearly.
That’s the reality for millions of people, especially from Mexico and Central America. They see the U.S. as a chance for a better life and take their chances, either by crossing the border without papers or by arriving legally on a visa and staying past the expiration date. Once they’re here, they take up jobs in construction, farming, and hospitality, the kinds of work that businesses struggle to fill because fewer Americans want them. Some argue that this pushes down wages for low-skilled workers, while others say these industries rely on immigrants to function.
Illegal immigration and the drug crisis, especially fentanyl, has much of it tied to Mexico and China. Every year, thousands of people cross the border illegally, looking for better opportunities, but along with them come criminals, drug traffickers, and a flood of illegal narcotics! Fentanyl is a synthetic opioid that is far stronger than heroin. This is killing tens of thousands of Americans each year. It only takes a tiny amount of fentanyl to cause an overdose, and cartels are mixing it into other drugs, making it even more dangerous.
Most of the fentanyl that enters the U.S. comes through Mexican drug cartels, which manufacture the drug in massive quantities and smuggle it across the border. But the real story starts in China, where precursor chemicals needed to make fentanyl are produced and then shipped to Mexico. Despite repeated warnings and diplomatic pressure, China has not done enough to stop these chemicals from reaching the cartels. Once the drugs are made in Mexico, they are smuggled into the U.S. using hidden compartments in vehicles, drug mules, and even underground tunnels.
Fin Fact! The Sinaloa Cartel, one of the most powerful drug organizations, generates an estimated $3 billion a year, which is more than the GDP of some small nations like Tuvalu or Nauru.
Interesting, right? Let your friends know!
The result has been devastating! American communities are flooded with cheap and highly potent fentanyl, leading to record-breaking overdose deaths. Law enforcement agencies seize thousands of pounds of fentanyl each year, but experts believe this is only a fraction of what actually makes it into the country.
The interesting bit is, the Biden administration had faced heavy criticism for its handling of the border crisis, with opponents arguing that weak policies have made it easier for cartels to operate. So, here is Trump stepping in, to present a stark contrast to the previous administration.
The world is Reacting
“Every action has an equal and opposite reaction” - This physics law is applicable to global politics as well.
Global politics is like a game of chess, with each country making strategic moves based on its own interests. Some choose confrontation, others prefer diplomacy, and a few take unexpected paths to gain an advantage. As the trade war escalates, nations are responding in different ways.
Canada is not backing down. Mark Carney, who is expected to be the next prime minister, has made it clear that Canada will fight back by imposing the same level of tariffs on U.S. goods. He calls Trump’s move an act of “bullying” (yes, BULLYING!), and the current Prime Minister Justin Trudeau fully supports this stance, refusing to let the U.S. dictate trade terms without consequences.
Mexico is on the calmer side. President Claudia Sheinbaum argues that tariffs are not the solution and issues should be solved through discussions. China, who has been through it in the past as well, quickly files a complaint with the World Trade Organization (WTO), saying that Trump’s tariffs violate international trade laws. Even though the lawsuit is mostly a symbolic move, it is a big deal in the global village!
Surprisingly, India is not on the Radar
Despite President Trump’s history of calling India the “tariff king” and criticizing its high import duties, India has managed to stay off the list of countries facing new U.S. tariffs. Many expected India to be a target, especially given its $35.32 billion trade surplus with the U.S. in FY24. However, a mix of strategic economic moves and diplomatic ties has helped India avoid the penalties this time.
But such expectations had some significant impact on Indian markets as well.
On February 10, 2025, Trump announced new 25% tariffs on all steel and aluminum imports. The BSE Sensex plunged 548 points, closing at 77,312, while the Nifty 50 slipped 178 points, ending the day at 23,382. The hardest-hit sectors were Metals and pharma. It is because there were expectations of tariffs and global demand slowdown, while pharma stocks declined over regulatory uncertainty and potential U.S. import restrictions.
Numbers for nerds! Below is a table highlighting the performance of major metal and pharmaceutical stocks on February 10, 2025:
In the recent budget, India reduced its average customs duties from 11.65% to 10.66%. This move signals its intent to ease restrictions and improve global trade relations. The U.S. has long criticized India’s high tariffs on electronics and agricultural goods, but these reductions indicate that India is addressing some of Washington’s concerns. Moreover, with the U.S. actively seeking alternatives to Chinese manufacturing through its “China-plus-one” strategy, India has positioned itself as a key alternative manufacturing hub for American companies. Raising tariffs on India now could disrupt this evolving trade alignment and push U.S. firms to reconsider their India investments.
By the way, one of our flagship multi-cap portfolios, is designed to align perfectly with India’s growth story. This strategy taps into India’s push for Atmanirbhar Bharat and the China Plus One strategy, focusing on sectors like Pharma and Chemical sectors which are poised for massive growth. We will help you invest: Check out our product: High Quality Right Price Fundamental.
Beyond trade, India’s growing strategic partnership with the U.S. has played a crucial role in keeping it off the tariff list. The two countries have been deepening ties in defense, technology, and pharmaceuticals. Disrupting this trade with additional tariffs would risk economic losses on both sides.
Moreover, Modi met Trump yesterday itself (on February 13, 2025) and stressing the need to break down human trafficking, he stated that India is ready to bring back its citizens living illegally in the U.S., as long as their Indian identity is confirmed. Overall, everything that impresses the U.S.!
The broader picture suggests that India is playing a careful diplomatic game, ensuring that its trade relations with the U.S. remain strong while avoiding the type of aggressive stance that led to tariffs on Canada, Mexico, and China.
Illegal immigration in India
Illegal immigration is not new an issue!
But recently enough, it has become a hot debate due to rising migration crises, stricter immigration laws, and political tensions. Illegal immigration isn’t just a big debate in the U.S. India has its own version of it too. If you’ve followed the news in recent years, you’ve probably heard about the Citizenship Amendment Act (CAA) and the National Register of Citizens (NRC). These laws sparked massive discussions, protests, and a whole lot of confusion.
At the heart of it, the Indian government said it wants to address illegal immigration, especially in states like Assam, where there have been long-standing concerns about people crossing over from Bangladesh. Many locals feel that undocumented migrants take away jobs and change the region’s demographics. The NRC was an effort to create a list of legal Indian citizens in Assam, but when millions of people, including many Hindus, were left off the list, things got complicated.
That’s where the CAA came in! If you are a North Indian you have definitely heard about it in the news!
The government introduced it to give fast-track citizenship to persecuted minorities - Hindus, Sikhs, Buddhists, Jains, Parsis, and Christians from Pakistan, Bangladesh, and Afghanistan. But it left out Muslims, which led to criticism that the law was discriminatory. People against it argued that citizenship shouldn’t be decided based on religion, while supporters said it was about helping refugees, not targeting anyone.
Together, the NRC and CAA raised fears that certain communities, especially Muslims without proper documents, could be left stateless. If a nationwide NRC was implemented, experts believe millions could be affected, especially Muslims who are not covered under the CAA, leading to fears of mass statelessness and legal uncertainty!
Final words.. At its core, the debate is about more than just laws and issue of identity. It all boils down to the economy, finances and power-play.
While you wait for Trump’s next big action..
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