‘Total Economic Chaos After April 2’: Analyst Pant's Chilling Warning For Trump's Tariffs

The world braces for a seismic shift on April 2nd as the U.S. President Donald Trump prepares to unleash sweeping tariffs on multiple countries—a move he dubs “Liberation Day.” The implications are vast, threatening to plunge global trade into turmoil and upend multilateral agreements. As nations scramble to respond, India finds itself at a crossroads—caught between its strategic ties with the U.S. and the looming threat of economic fallout. To decode the stakes and unravel the geopolitical complexities, Republic Business spoke to  Harsh V. Pant, Vice President, Studies and Foreign Policy at ORF and Professor of International Relations at King’s College London. 

Edited Excerpts:

The entire world is jittery about tariffs on April 2. What do you anticipate? 

I think Mr. Trump is making the world once again face the full consequences of American power. And the American economy has been very powerful for the last several decades, driving the global economy. It's very unfortunate that he feels that tariffs are the way to go because tariffs generally are not seen as a very healthy sign.

They are seen as a dampener on global economic activity. But he's using those tariffs as a tool not only to make his case that America has been taken advantage of, which he believes that the global economic system has made a fool of the Americans and have driven them towards impoverishment because the manufacturing has gotten out of America. He feels that tariffs are the best way to protect those industries and create employment for Americans.

Make America great again, he believes will flow through the tariff regime that he wants to push on other countries. But by and large, we know from basic economic logic that tariffs, especially of this order of this magnitude, will only lead to a trade war and will lead to a deterioration of the global economy, which is the last thing that the world needs at this point. In any case, the global economy is not doing very well.

Do you feel that India is quite insulated from whatever turmoil that we are witnessing as far as tariffs are concerned?

I think we see, we don't know, but certainly we are better positioned because we have had the first mover advantage. Prime Minister Modi visited Mr. Trump and in some ways he has laid out a joint framework with Mr. Trump about the economic relationship that India wants to develop with the US and pushing Trump in that direction, he has allowed for some time for India. Again,  he may discard them because Mr.

Trump has been known to discard old assumptions and old arrangements. But in this particular case, I feel that India, what India's claim is strong because what India is, will be telling the Americans that, look, we are in any case negotiating a bilateral trade agreement. So you have to understand that the logic of tariffs, if applied right now, will lead to difficulties in the conclusion of the bilateral tariff trade agreement, which the first phase of which is to conclude in the Autumn, according to Mr. Trump and Mr. Mr. Modi's joint statement.

I think somewhere down the line that has, that has brought us some time and hopefully India will be able to convince Mr. Trump said that imposing tariffs like we'll be doing on other countries at this juncture would be a bad idea for the broader agreement, which he believes will be beneficial for India, US Relationship and for US in general. And I think he has repeatedly said that, look, I understand that Mr. Modi is a better negotiator. He's great.

He has said so in a sense, I think he understands that India is coming from a different position. India is coming from a position of strength into these negotiations. But we don't know with any degree of finality as to how he would react because he believes in whims and fancies.

In some ways, he goes by his instincts. And it is possible that he might think that putting pressure on India before negotiations by imposing these tariffs might also be a good idea. 

Do you feel that the world trading system will survive Trump's tariffs? And what is going to change as far as global politics is concerned after April 2nd? 

See, we are already into a phase where the World Trade Organization is no longer working, where the trade arrangements that were put in place with great degree of difficulty through a multilateral process have been discarded. Countries are increasingly interested in negotiating bilaterally with each other as well as with Mr. Trump.

So I think we are already in a phase where the global economy is not looking at a multilateral system pushing the global economic governance agenda. It is being negotiated bilaterally, including our foreign minister who said that everything is under negotiation at this point, whether you talk of trade, whether you talk of tariffs, whether you talk of investments, whether you talk of technology.

Everything is being renegotiated as we speak. And in that context, I think it's, what we are going to see certainly is that the damage and the lasting damage that the global economic multilateral arrangement will see from Mr. Trump now will have perhaps a fundamentally disruptive effect because we have already been witnessing a gradual weakening of the global economic order, something that Mr. Trump started in his first term. It was continued by the Biden administration. And now with Trump 2.0 continuing and accelerating that process, I think we are in for a disruptive, fundamentally disruptive phase. 

So what is the kind of a difference that you see in the first term and the second term Trump?

Well, as you rightly say, in the first he was more focused on China, although he imposed tariffs on other countries, including on India, to a limited extent at that point, but they were fairly limited.

They were, they were sectoral. They were not really across the board in this particular case. And he has always believed the tariffs are a great instrument of economic correction, which he believes is needed in the global economic order in favour of the US and particularly in generating manufacturing and in redeveloping America's manufacturing base.

Now, how far in his second term he continues with that remains to be seen because in some cases he has also suspended,  he has announced tariffs and then he has suspended, for example, he did that initially with Canada and Mexico. Now because he's using tariffs as a negotiating tool. So initially also he imposed tariffs on Canada and then Canada said, we are willing to change our border regulations.

But since he has come to office, you see he has imposed gradual tariffs. So I think he's using tariffs also as instruments of gradual negotiation with the other side. Particularly when he is saying that I'm going to impose across the board tariffs on April 2 and they are going to come into effect.

It will be interesting to see whether he does it for selective countries, whether he suspends it for certain countries, whether he gives some countries exceptions, as I, as you were discussing about India. And then we can make an assessment whether he is using those political tools or he will continue to use them across the board. At the moment, it seems that he seems more willing than in the past to use them across countries and to ensure that those countries give America better terms of engagement.

There is a kind of a chaotic geopolitical situation where there are retaliatory tariffs. In which direction we are headed?

I think we are headed in the direction of significant chaos. Because, when the whole point of having a global multilateral arrangement, a World Trade Organization, was to ensure that there is predictability in global economic relations if countries do not have predictability and there would be no sustainability in policies. And I think Mr. Trump unleashing these tariffs is ensuring that countries are going to look more and more inwards. Countries are going to be very skeptical of any kind of a global economic arrangement being useful for them and therefore are going to rely on unilateral actions or bilateral actions. So in some cases, America imposes tariffs.

Other countries also impose reciprocal tariffs, just as Canada did, just as Chinese have done. And I think last time also when Trump won 1.0, when America had imposed certain tariffs on India, India had imposed equal reciprocal tariffs on the US and the matter ended there.

But I think this time around, he seems more intent on driving through these tariffs towards a process where a larger global response might be needed. And unfortunately, most countries at this point are interested in bilateral engagement with Mr. Trump, but for their own reasons.

And all those reasons are based on the national interest. And I think given that we are going to see greater bilateral engagement of Mr. Trump. We are, I think, in a period where more chaos would ensue and more unpredictability will come, volatility will come in the global economy. 

And you are seeing the markets the world over react to that volatility, to that unpredictability. 

And do you feel that it's going to help make America great again? Do you feel that this whole concept and idea of imposing tariffs is going to help the US?

I mean, economic logic tells us that it won't.

And we are already seeing also the cost of living rising in the U.S. inflation rising in the U.S. because of these tariffs. And I think  in some cases it can be counterproductive. For example, in automobiles we have seen that there is a concern in the US that automobiles will become expensive. 

So we are going to, I think in a phase where he seems to be testing, he's also very conscious, Trump is very conscious of how the market behaves. So maybe he will see the market reaction and he'll come back to a more normal process. But at the moment, he's certainly going all out when it comes to tariffs.

And there is no evidence, historically or on the basis of economic theory, that tells us that such kind of massive unleashing of tariffs is going to create greater manufacturing in the US. We have not seen that happen in the past. And it's very unlikely that in and of itself it will generate. I think what it is going to do is to make certain countries more aware of the, of the negative aspects of global, of economic globalization and therefore correct some of the imbalances in that economic globalization, which is certainly something that Mr. Trump has been able to achieve this by targeting countries, by allowing his MAGA base to dominate the discourse and by using a political argument to push in the economic realm where today trade cooperation, for example, is seen as negative. 

You know, in the past you would say that, look, if you trade with countries, you trade with, you develop economic interdependencies, you develop better political relations. I think since Mr.

Trump's arrival, we have seen an inversion of this argument that you only trade with countries with whom you have good political relations and you do not develop economic interdependencies because it not only makes you vulnerable to the, to economic coercion, but it also leads to a certain set of dependencies which is not good for your domestic manufacturing base. And a lot of them, a lot of countries, including India, have taken lessons from it. India also has its make in India self reliant India program which grew out of this sense that we do not want to be over dependent on any one country.

But in India's case, we have been openly embracing certain aspects of economic globalization and we are reluctant to use tariffs as an instrument of policy. Mr. Trump continues to believe in sort of unleashing tariffs like the way he is doing now.

And increasing tariffs therefore will have costs for American consumers. And it is unclear whether it will lead to a resurgence of the manufacturing base in the US as he thinks it should, and it might. Right.

And so last two questions, hypothetically, if on second April, the good news doesn't flow from us as far as India is concerned, how should we tackle it? See, I think in some ways there is an automaticity to the reaction of countries. India will also impose some reciprocal sanctions which will be relatively basic. So what India has done in the past now, which sectors India targets, I think depends on the kinds of conversations we are having with the US on the bilateral trade agreement because it's a very complicated agreement.

We have already started negotiations and we would not want that, that whole negotiating process to come to an end. We would like those negotiations to conclude early. We would want something positive, we would want to get some positive outcome of it.

So I think we will also be careful while we want to draw certain red lines, we would also push back. But I think how much we push back and to what extent would depend on how the negotiations so far on the BT have progressed. 

What is your biggest worry as of now and what is your biggest worry post 2nd of April once the tariffs are announced on the various countries?

See, I think the biggest worry for a country like India which is still developing its economy, which wants to grow fast, is that in this age where tariffs are being used recklessly by the single most powerful global economy, the global economy will continue to suffer. And if the global economy suffers, then India's growth rate will be affected because India relies on a larger favorable global outcome to sustain its economic growth.

And if the global economy is not favorable, then it is, it is very unlikely that India will be able to achieve the 8-9% rates of growth that Indian policymakers want and India should if India has to achieve the $10 trillion economy mark over the next five years. So I think that's the biggest worry at this juncture from an Indian perspective. Right.