The World This Week#322

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The World This Week

The World This Week#322

US tariffs on India, Brazil and Canada & the EU-US trade deal

The World This Week #322 Vol 7, No 31, 03 Aug 2025

GP Team
3 August 2025

Trump tariffs:
Weaponization of access to the US economy
Abhiruchi Chowdhury

What happened?
On 31 July, US President Donald Trump authorized an executive order for imposing new import duties on countries which were unable to strike a deal with the US, in the 90-day pause period, post announcement of reciprocal tariffs. The import duties are set to be applicable from 07 August.

On 30 July, Trump on his social media handle announced about imposing 25 per cent duties on goods imported from India. Justifying the move he criticized India by writing “they have always bought a vast majority of their military equipment from Russia, and are Russia’s largest buyer of energy.” On 31 July, yet again expressing his discontent with India’s relationship with Russia, he wrote “they can take their dead economies down together.”

For Canada, the Trump administration imposed 35 per cent duties on imported goods which are not included in the US-Mexico-Canada FTA. Around five per cent of the exported goods to the US from Canada are likely to come under the ambit of 35 per cent duties, applicable from 01 August. On the same, the Canadian PM Mark Carney said “Ottawa is disappointed.” Trump alleged that Canada remains unsuccessful in putting an end to the smuggling of fentanyl and other drugs from Canada.

For Brazil, the imposition of 50 per cent tariffs was a response to the current Brazilian government indicting erstwhile President Jair Bolsonaro. The current Brazilian president Luiz Inacio Lula da Silva saw the tariffs as subversion of “national sovereignty and the historical relationship between the two countries.” Some of the items which will not incur tariffs are civil aircraft and parts, energy items, fertilizers, aluminum, tin etc.

What is the background?
First, Trump’s complaint on India’s cooperation with Russia in the energy sector. After 2022, India emerged as one of the largest importers of Russian oil. For the financial year 2024-25, India on an average imported 4.88 barrels per day. Further, close to 49 per cent of the stakes in India’s Nayara, which is country’s second largest oil refinery, are with Russia’s state oil company Rosneft. President Trump, who had earlier vowed to put a quick end to Russia-Ukraine war, warned the countries importing oil from Russia of enforcing 100 per cent duties on their exports to the US.

Second, Trump’s complaint on fentanyl smuggling through the US-Canada border. On 1 February, President Trump had enforced 25 per cent duties on Canada’s exports to the US. As per the Trump administration, the move was meant to compel Canada to employ stringent measures for controlling the flow of illegal migration and fentanyl. Nevertheless, the seriousness of fentanyl problem is questionable. As per Centers for Disease Control and Prevention, there has been a decrease of 21 per cent in cases of lethal overdosing from fentanyl and other drugs. On top of that, less than one per cent of the fentanyl that is smuggled into the US, comes through the Canadian border.

Third, Trump’s support for Bolsonaro in Brazil. In January, 2023, protesters in favor of Bolsonaro attempted to barge inside Brazil’s congress, Supreme Court and President’s residence. The protesters were unhappy with Bolsonaro losing the elections and wanted to reverse it. The incident is very similar to the assault on US Capitol building in 2021 by supporters of Trump. Trump, during his first term shared cordial ties with the former President of Brazil. Supporting the former president, he also drew parallels between his and Bolsonaro’s legal troubles. Backing Bolsonaro, on 7 July, Trump on his social media wrote “Brazil is doing a terrible thing on their treatment of former President.”

What does it mean?
First, the problem for India’s textile sector is not just imposition of 25 per cent tariffs, but also that its competitors from Bangladesh and Pakistan would incur much lesser tariffs. The signing of the free trade agreement with the UK after which Indian goods would be at par with the goods of other competing countries might provide some relief. However, the same would only be applicable from the next year. New Delhi would probably have to look for other partners such as the EU for offsetting the loss due to the US tariff increase. Nevertheless, the loss would be to American consumers who anyway have to pay increased duties on readymade garments irrespective of whether the same has been manufactured in Vietnam or India.

Second, it is quite evident that the imposition of tariffs on Canada is not because of the illegal smuggling of fentanyl. The steel and aluminum exports from Canada already faces 50 per cent duties in the US, whereas cars and accessories incur 25 per cent duties. An additional 35 per cent duties on products which do not come under USMCA could be a consequence of Ottawa’s shift from pro-Israel stance.

Third, the overall idea of reciprocal tariffs was to reduce US’s trade deficit. However, the Trump administration deploying tariffs on countries like Brazil with which US has a trade surplus imply that access to US economy is being weaponized for interfering in domestic politics.

The US-EU Trade Deal:
Balancing under pressure
Swati Sood

What happened?
On 25 July, US President Donald Trump stated that there was a 50-50 chance that the US would reach a trade agreement with the EU.

On 27 July, Trump agreed on a trade deal with European Commission President Ursula von der Leyen, describing it as the “biggest deal ever made.”

On 28 July, various European leaders welcomed the deal, with EU Trade Commissioner Maros Sefcovic saying that this was “the best deal we could get under very difficult circumstances.” However, other European leaders criticised the deal. Italian Prime Minister Georgia Meloni stated that the agreement ensured stability but was incomplete with “a number of elements” missing in “particularly sensitive sectors” such as pharmaceuticals and the automobile industry. Countries with higher export volumes to the US, such as Germany and the Netherlands, welcomed the trade deal, whereas the French Prime Minister called it a “dark day” because Europe had resigned itself to “submission.”

On 31 July, Trump issued an executive order modifying tariff rates, imposing 0-15 per cent tariffs on goods imported from the EU.

What is the background?
First, a brief note on reciprocal tariffs and US-EU trade tensions. On 12 July, Trump announced that 30 per cent tariffs would be imposed on the EU, warning that any retaliatory tariffs would be added on top of the 30 per cent base rate. On 14 July, EU leaders responded by preparing counter-tariffs targeting US goods worth EUR 72 billion. On 17 July, Trump said that a deal was “possible.” On 18 July, President Trump threatened to impose tariffs of 15-20 per cent on all goods imported from the EU. The EU and the US share the world's largest bilateral trade relationship, with a trade volume of EUR 1.6 trillion in 2023. The EU is not just a critical supplier to the US but also the largest buyer of US natural gas and oil.

Second, the Trump-EU relationship. President Trump has advocated for ensuring US allies–including the EU–contribute to their partnership with the US on equal terms. A recurring point of contention has been the ‘imbalanced’ nature of the trade relationship between both economies. Last year, Trump stated that US allies are given military protection; however, they exploit the US in terms of trade. He argued that this will not continue anymore, declaring that the United States will be a “tariff nation.” In January 2025, Trump highlighted that the EU has been “very unfair” and that there are “some very big complaints with the EU,” calling it “nastier than China.”

Third, internal rifts within the EU. Member states within the EU remained divided over the response to reciprocal tariffs. France and Spain pushed for a tougher approach with immediate retaliation, while high export volume countries like Germany and the Netherlands urged caution and highlighted the importance of a deal with the United States.

Fourth, the EU’s dependence on China. 100 per cent of heavy rare earth elements in the EU are supplied by China, including terbium, samarium, and dysprosium. These critical raw materials (CRMs) are pivotal for producing permanent magnets used in electric vehicles, wind turbines, and advanced consumer electronics. Additionally, China is a major supplier of laptops, solar panels, and lithium-ion batteries, consisting of materials like lithium, cobalt, graphite, and gallium that are essential for the EU's digital and clean-energy transition. Thus, there were concerns within Europe that failure to reach a trade deal with the US could result in Chinese exporters pivoting towards unexplored market segments in Europe.

What does it mean?
First, the impact on the economy of the US and the EU. Tariffs imposed on imported EU goods will increase production costs and commodity prices in the United States. These inflationary pressures can reduce purchasing power and overall consumption, thereby worsening the cost-of-living crisis. Further, European goods will become more expensive and less competitive in the American market, potentially reducing EU exports. Low export volume will reduce production and wages, resulting in a marginal reduction in the EU’s GDP. On the other hand, the EU’s decision to drop tariffs on US goods will provide EU consumers and businesses with affordable goods. US exports with duty-free access to European markets will ensure a positive outlook for manufacturing and employment in the United States; however, high input costs due to expensive imports of raw materials from the EU could limit substantial gains.

Second, implications for EU-China relations. The US-EU trade deal reshapes the EU's economic ties with China. While the EU has sought to align itself strategically with the US, diversifying the supply of critical raw materials (CRMs) is an incremental process. If the US fails to meet European demand, the EU can find itself managing a dual dependence on the world’s two largest economies.

TWTW Regional Roundups

News from around the world
Padmashree Anandhan, Rizwana Banu S, M Santhiya, Merin Treesa Alex, Rohini Reenum, Femy Francis, Anu Maria Joseph, Kasvi Batra and Swati Sood.

CHINA THIS WEEK
China: To offer nationwide subsidy of USD 500 for childbirth
On 28 July, China’s National Development and Reform Commission announced that they are introducing a nationwide childcare subsidy plan to support families and encourage childbirth. The program will give USD 503 per year for each child under the age of three. The subsidy will be exempted from tax and will not be included in a household or individual's taxable income. This policy will benefit more than 20 million families each year. China, the world’s biggest population, is facing a decline in the birth of newborns, and its population is rapidly ageing. China, previously, halted the one-child policy by allowing Chinese couples to have two children from 2016. They also supported couples who wanted to have three children. Similar initiatives have already been introduced in the other regions of China, like Inner Mongolia, which grant a one-time subsidy of RMB 10,000 for the first child in the family, and the second child receives an annual subsidy of RMB 10,000 until the age of five and the third child will get a yearly subsidy till, they are of age 10.

China: Russia and China to hold joint Pacific naval exercise “Joint Sea 2025”
On 30 July, China’s Ministry of National Defense announced that China and Russia will hold their “Joint Sea 2025” naval exercise in August. This will be the sixth joint maritime patrol to take place in the Pacific region. The Ministry spokesperson, Zhang Xiaogang, informed that the exercise will take place near the Vladivostok airspace. He said: “This is an arrangement within the annual cooperation plan between the Chinese and Russian militaries. It is not targeted at any third party, nor is it related to the current international and regional situation.” The announcement comes in light of the US hosting Air Force exercise “Resolute Force Pacific 2025,” in Hawaii, Guam, and Japan. Zhang extrapolated that the US is clinging to a Cold War mentality and his flexing in the Asia-Pacific region by ganging up in the guise of military drills. This, in turn, will undermine the peace and stability in the region. The China-Russia exercise involves warships, aircraft, and support staff from both sides.

China: Hosts peace talks between the Cambodian and Thai representatives
On 30 July, China hosted talks between the representatives from Thailand and Cambodia, aimed at restoring stability in the region after tensions flared between the two countries. The discussion was held in Shanghai, hosted by China’s Vice Minister of Foreign Affairs, Sun Weidong. He secured a commitment from both sides to abide by the ceasefire. China’s Ministry of Foreign Affairs spokesperson, Gui Jiakun, informed that the meeting was candid, friendly, and conducive. Guo added that China is working towards creating conditions for an early restoration of peace and stability. Guo said: “We stand ready to maintain close communication with Cambodia, Thailand, and Malaysia, and other regional countries to play a constructive role in cementing the ceasefire agreement and to restore regional peace and stability.” The conflict between the two countries started after landmines exploded, wounding five Thai soldiers, after months of escalation.

China: Torrential rains kill 60, mostly elderly, from nursing home facilities
On 31 July, Reuters reported that after the extreme rains that ravaged China across northern China, it is estimated that 60 people have been killed. Out of which more than half of them were at the care home facility for the elderly. The torrential rains began last week, and 31 people from the nursing home in Miyun's Taishitun died. Though the authorities were alerted to the elderly trapped in the facility but due to the rains and water, the rescue mission was hampered. Miyun’s top official, Yu Weiguo, said: “This showed that our contingency plan had flaws, and our understanding of extreme weather was inadequate.” There were 69 elderly people in the nursing home, of whom 55 had functional impairment. The river's peak flow was 2.3 times higher than they have seen in a century. It is reckoned that more than 300,000 people have been affected by the flooding and rains, 24,000 homes and 242 bridges have been damaged.

China: Kuwait complete their ammunition facility construction, reports SCMP
On 01 August, SCMP reported that China and Kuwait completed the construction of an ammunition factory in the Gulf State. Kuwait’s Deputy Ministry of Defense, Sheikh Abdullah Meshal Al-Sabah, noted that this project is a milestone in their cooperation with China. He also noted the military training programmes between the two countries started in 2019 and will expand every year. China’s Embassy in Kuwait stated that this will promote China-Kuwaiti military relations to new heights, and the Chargé d’affaires Liu Xiang called on both countries to adhere to peaceful development. Kuwait is the first Gulf state to have signed a military cooperation agreement with China in 1995. China has supplied 155mm cannons, and the PLA Navy has visited Kuwait three times since 2011. Tactical Report found that China has reached out to Kuwait to aid their defense needs without any preconditions, and is offering to advance their military equipment.

China: China calls for advanced high-level cooperation and development with Switzerland
On 31 July, China and Switzerland culminated their official goodwill visit, where China's top legislator Zhao Leji called for advanced high-level cooperation and development. He noted that Switzerland was one of the first western countries to have established diplomatic ties with the PRC. Chairman of the National People’s Congress, Zhao Legi said: “Over the 75 years since the establishment of diplomatic relations, the two countries have jointly cultivated a spirit of cooperation featuring "equality, innovation and win-win," setting a model for cooperation between countries with different social systems, at different stages of development and of varying sizes.” He noted that China is ready to work with Switzerland and to implement the consensus. President of the National Council of Switzerland Maja Riniker said: “The National Council of Switzerland stands ready to strengthen cooperation with the NPC of China to play an active role in pushing for an upgrade of the free trade deal between the two countries, as well as promoting sustainable development.”

EAST ASIA AND PACIFIC THIS WEEK
South Korea: South Korea and US reach tentative trade deal, tariffs reduced to 15 per cent
On 31 July, The Straits Times reported that South Korea had reached a provisional trade agreement with the United States, which helped avoid the imposition of a 25 per cent tariff on Korean goods. As part of the agreement, the USA will apply a lower 15 per cent tariff, while Seoul has pledged USD 350 billion in US based investments; USD150 billion for shipbuilding and USD 200 billion for sectors such as semiconductors, clean energy, and biotechnology. South Korea also agreed to purchase USD 100 billion worth of American energy exports. South Korea’s Trade Minister Yeo Han-koo noted that the deal is not yet formalized in writing, as critical components including digital trade, security clauses, and currency matters are still under negotiation. The agreement was made in haste ahead of the 1 August deadline, raising doubts about its stability and enforceability.

South Korea: Foreign residents hit record high, but South Korea’s population remains stagnant
On 31 July, The Straits Times reported that South Korea’s total population has remained largely unchanged despite the number of foreign residents exceeding two million for the first time. According to Statistics Korea, the population reached around 51.8 million in 2024 with an increase of just 0.1per cent or 31,000 people from the previous year, marking the slowest growth in decades. This minimal rise is mainly attributed to a growing foreign population, which jumped by 110,000 to 2.04 million, now making up 3.9 per cent of the national total. Meanwhile, the number of native South Koreans declined by 77,000, and the working-age group (15–64 years) shrank by 283,000. In contrast, the elderly population (65 and above) rose to 10.12 million which nearly 20 per cent of the population. While the influx of foreign nationals, particularly students and temporary workers, has slightly eased demographic pressure, experts caution that it’s not enough to counter the effects of a rapidly aging society and persistently low birth rates.

New Zealand: New Zealand would not yet align with the UK’s recent move to recognise Palestinian statehood, says PM Luxon
On 31 July, RNZ reported that Prime Minister Christopher Luxon stated New Zealand would not yet align with the UK’s recent move to recognise Palestinian statehood. While reaffirming support for a two-state solution, Luxon stressed that the immediate focus should be on facilitating humanitarian aid into Gaza, rather than prematurely shifting attention to diplomatic recognition. He added that New Zealand would “talk to the UK” about its position but clarified, “not at this point”. Foreign Minister Winston Peters echoed the government’s long-standing stance, describing recognition as a matter of “when, not if.” However, he underscored that formal recognition must be contingent on clear progress such as the establishment of a legitimate and representative Palestinian government, a commitment to non-violence, and assurances for Israel’s security. Meanwhile, former Prime Minister Helen Clark criticised the current government's hesitance, arguing that New Zealand is “lagging behind” other Western nations like the UK, France, and Canada, and urged action amid the worsening crisis in Gaza.

New Zealand: FBI opens office in New Zealand to boost regional crime and intelligence cooperation
On 31 July, The Straits Times reported that the U.S. Federal Bureau of Investigation (FBI) has opened its first independent office in Wellington, New Zealand, upgrading its earlier arrangement managed via Australia. FBI Director Kash Patel stated that the new office will strengthen cooperation on regional threats such as cybercrime, child exploitation, terrorism, and money laundering, while also reinforcing intelligence-sharing within the Five Eyes alliance. Patel noted the move would help counter the Chinese Communist Party’s influence in the Pacific, though New Zealand ministers refrained from echoing this view, focusing instead on joint efforts against transnational crime. Officials from New Zealand emphasized the law enforcement nature of the collaboration, downplaying any geopolitical motivations. The office will also oversee FBI operations in surrounding territories including Tonga, Samoa, Niue, and even Antarctica.

MIDDLE EAST THIS WEEK
Iran: President Trump levels fresh threats against Iran’s nuclear programme
On 28 July, US President Donald Trump issued fresh threats against the Iranian nuclear programme following statements by Iran that it will not abandon nuclear enrichment for civilian purposes. He made a statement during a press conference in Scotland and argued that Iran was sending “very bad signals, very nasty signals” and that the US would again destroy their “nuclear possibilities” if need be.

AFRICA THIS WEEK
Sudan: The African Union condemns RSF's announcement of a parallel governing council
On 1 August, the African Union (AU) condemned the Rapid Support Forces' (RSF) announcement of a rival governing council in Sudan. The RSF declared General Hamdan Dagalo as the head of the 15-member Presidential Council and Mohamed Hassan al-Ta’ayshi as Prime Minister. The RSF controls key urban and central areas, including parts of Khartoum, and areas in Darfur and Kordofan. The AU called on the member states to withhold recognition of the RSF-led administration , as this announcement challenges the internationally recognized government led by General Abdel Fattah al-Burhan, which controls Sudan’s north, east, and centre, including the capital Khartoum. The Sudanese military has vowed to continue fighting until it regains full control of the country.

EUROPE THIS WEEK
Eurozone growth up by 0.1 per cent despite concerns over EU-US trade deal
On July 30, Euroactiv reported the eurozone economy grew by 0.1 per cent in Q2 2025, beating forecasts despite concerns over the new EU-US trade deal. Growth slowed from 0.6 per cent in Q1 but exceeded the predicted zero growth. Spain (0.7 per cent) and France (0.3 per cent) grew strongly, compensating for 0.1 per cent contractions in Italy and Germany. Year-on-year, eurozone output rose 1.4 per cent. The EU-US trade deal imposes a 15 per cent tariff on most EU exports to the US, up from 10 per cent, but below the 30 per cent previously threatened. Economists expect it will reduce EU growth by around 0.5 per cent this year, though uncertainty remains. The IMF raised its 2025 eurozone growth forecast from 0.8 per cent to one per cent, mainly due to a surge in Irish pharmaceutical exports. Private sector activity hit an 11-month high in July, led by German manufacturing. Economist Cyrus de la Rubia said the tariffs may not hurt Germany as its recovery will be supported by EUR one trillion investments in infrastructure and defence over the next decade.

The UK: Government to recognise Palestinian state if Israel disagrees to ceasefire
On 30 July, Prime Minister Keir Starmer announced the UK would recognize a Palestinian state at the UN General Assembly in September unless Israel agrees to a ceasefire in Gaza and commits to a peace process. The move follows France’s similar pledge and growing international criticism over the humanitarian crisis in Gaza, where famine conditions have emerged and over 60,000 Palestinians have reportedly died. Aid efforts remain severely hindered, with the UN warning of “widespread death” amid extreme food shortages. Despite Israeli denials, international leaders, including former US President Donald Trump, have acknowledged the scale of the starvation.

Greece: Wildfires to continue due to dry and strong winds
On 27 July, Deutsche Welle reported on the wildfires that continued across Greece for a second day. The fires were affected by fast-spreading blazes driven by extreme heat and strong winds. The fires were active in Peloponnese, Evia, and Kythera. Experts predicted that the fires would die down in almost all areas except Kythera, a popular tourist island, where they were expected to continue. People were urgently evacuated from the area, and evacuation messages were sent. According to the deputy mayor of Kythera, half of the island has already burned, with houses, olive trees, and beehives destroyed, and a monastery under threat. Firefighters from the Czech Republic have joined the efforts, with additional aircraft from Italy expected to assist. In Evia, there were flare-ups overnight that destroyed forests, killed thousands of farm animals, and damaged power and water supply lines. Fires in Crete destroyed houses and a church but have mostly been contained. Police forces were also deployed in Kryoneri, north of Athens, to protect homes from possible looting after evacuations. Eleven regions in Greece remain at very high risk for wildfires.

About the Authors
Swati Sood is an undergraduate student in Political Science at the University of Delhi. Abhiruchi Chowdhury is research assistant at the National Institute of Advanced Studies (NIAS). Lekshmi M K is pursuing postgraduation in the Department of Political Science, Madras Christian College, Chennai. Femy Francis, Anu Maria Joseph, and Padmashree Anandhan are Project Associates at NIAS. Rohini Reenum is a Doctoral Student at NIAS. is Project Associates at NIAS. Kasvi Batra is a Research intern at NIAS. Rizwana Banu S is an undergraduate student at the Department of Political Science, Madras Christian College. Merin Treesa Alex is a postgraduate student at the Department of International Studies, Stella Maris College, Chennai. M Santhiya is from the Department of Political Science, Madras Christian College, Chennai.

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The World This Week

The World This Week#322

US tariffs on India, Brazil and Canada & the EU-US trade deal

The World This Week #322 Vol 7, No 31, 03 Aug 2025

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