How will Trump’s 2025 Tariffs affect countries like US, UAE, China and India?

US Economy and Domestic Shifts

The world didn’t take the tariff announcement really well. A bloodbath around the global markets is enough proof. On April 2nd, Trump announced the retaliation tariffs. Following day on April 3rd, US Index S&P500 fell about 4.83%. Dow Jones Industrial Average dropped nearly 1700 points, Nasdaq Composite fell almost 6%, making their worst-single day performances since 2020. The sell-off wiped out trillions of dollars in market value and sent shockwaves through global financial systems.

The agenda of tariffs is essentially to give local manufacturing a boost by making foreign products costlier than they used to be. However, the weird thing about tariffs is that the brunt of extra cost is borne by the companies who call for the imported products, and these companies usually transfer these extra costs to their consumers, eventually leaving lesser money in the pockets of the average consumer. For example, electronic companies in America who need copper for their manufacturing, a 50% tariff on copper would make their manufacturing more expensive and eventually for the consumers too.

While official CPI inflation came in line with expectations at 2.7% year-on-year as of June 2025, economists warn that the full impact of tariffs is still unfolding. The Federal Reserve warned that tariffs could complicate monetary policy, especially in a high-rate environment. According to a report by Reuters, Fed Chair Jerome Powell said that the looming tariffs are expected to drive “a meaningful increase in inflation”. He added, “Everyone I know is forecasting a meaningful increase in inflation in coming months from tariffs. Ultimately, the cost of tariff must be paid, and some of it will fall on the consumer.”

UAE’s positioning amid global tensions

UAE, just like the rest of the world are facing uncertain times, however, a bittersweet reaction to the tariffs strategically places UAE in a better position than other countries. Trump has placed a 10% baseline tariff on UAE and Saudi Arabia and a steeper 20% on Jordan. These measures are expected to raise export costs for GCC-based businesses, potentially affecting their competitiveness in U.S. markets. However, not all outlooks are grim. Vijay Valecha, Chief Investment Officer with Century Financial, remains cautiously optimistic, noting that “given the relatively low volume of bilateral trade with US and GCC, the broader impact remains limited. The GCC contributes to 16% of America’s aluminium imports and a reduced foreign demand can be redirected for internal development.

Source:Statista; Office of the U.S. Trade Representative

However, the biggest sword looms over the Oil demand and Investment concerns. As one of Middle East’s leading oil exporters, the UAE’s fortunes are closely tied to global energy demand. When trade tensions rise and the world economy starts to cool down, factories slow, transport declines, and energy use dips. That ripple can hit the UAE hard, lower oil demand means lower prices, and directly impacts export earnings.

India’s trade alignment and response

All these years of Modi strengthening India’s bilateral ties have proved to be worthwhile. According to Moody’s ratings, India could benefit from lower tariffs as compared to counter parts like Vietnam and Cambodia. This will help India attract more foreign investment and strengthen its position as a manufacturing hub.

On July 24, India signed a landmark Comprehensive Economic and Trade Agreement (CETA) with the United Kingdom, eliminating tariffs on 99% Indian exports. This deal is expected to boost key sectors such as textile, leather, apparel, and marine products, further solidifying India’s position as a global manufacturing hub.

As far as the US is concerned, it slapped India too with a 26% tariff sending shockwaves across the seven seas. The Indian government is using the 90-day hiatus to establish a mini trade deal with the US. As per the latest updates, the talks are at a critical stage, with India seeking more access for its labour-intensive exports, and the US pushing for concessions genetically modified agricultural products, medical devices, and data localization rules. Additionally, it noted that while India stands to gain from supply chain shifts driven by tariffs, the transition in global sourcing patterns is expected to be slow and incremental.

Impact on China

“The only deal that matters is China, that’s the deal. Because these are the two largest economies and there are so many issues with China. Technology, Economic War, AI, Taiwan, TikTok, all of this stuff.” Said Kevin O’Leary, Shark Tank Investor on Fox News.

Export heavy provinces like Guangdong and Zhejiang are witnessing slowdowns in factory outputs and layoffs. Small and mid-sized manufacturers are particularly vulnerable as they lack the capital to diversify quickly.

China has been on the receiving end on the maximum number of retaliations along with US Markets, top tech and retail stocks dipping red, majorly due to US’ heavy reliance on Chinese imports. In fact, amidst the growing uncertainty regarding sweeping tariffs on August 1, Chinese ports saw a major uptick in its import and exports. Chinese exports rose 5.8% YoY in dollar terms in June beating expectations of 5% from a Reuters poll.

Source:China’s General Admission of Customs; Financial Times

Even with all this speculation, China refuses to turn down without a fight. Chinese businesses and investors are bracing for the Yuan to hold steady in the short term, with a likely depreciation ahead as US trade tensions persist. Recent signals and policy actions from monetary authorities indicate that this expectation way be well-founded.

Beijing even has imposed selective tariffs on key U.S. agricultural goods, like soybeans, but is focusing on strengthening trade ties with Asia, Middle East, and Latin America.