In an interaction with ET Now, William Lee from Milken Institute explained why tariffs are likely to remain a structural feature of the global economy and what lies ahead for trade in 2026.
A Temporary Rate, A Permanent Strategy
Lee noted that the current tariff framework is a stopgap after legal changes, but the underlying approach remains unchanged:“The 15% tariff is a holding pattern after the Supreme Court removed the legal base for many tariffs. The principle remains — invest and create jobs in the US to get lower tariffs; otherwise, expect higher tariffs.”
The emphasis on domestic investment signals continuity in policy even if rates fluctuate.
Tariffs as a Fiscal Tool
He also highlighted the fiscal motivations behind maintaining tariffs:“The US faces a large fiscal deficit, and tariffs — raising about $240 billion annually — are a major revenue source. It is unlikely any president will give that up, so tariffs are here for good.”
Lee added that countries like India may increasingly pursue sectoral deals or consider local manufacturing in the US to manage tariff risks.
2026: A Year of Trade Realignment
Looking ahead, Lee expects widespread renegotiations and supply chain diversification:
“Global trade patterns will shift toward more diversified and duplicated supply chains. Countries will have to decide whether to partner with the US or compete, and many negotiations will follow.”
Implications for India and Investors
For India, the evolving landscape could encourage deeper engagement through bilateral deals, especially in pharmaceuticals and manufacturing, while services exports remain relatively resilient.
Investors should watch for companies with flexible supply chains and strong global positioning, as trade fragmentation could create both opportunities and volatility across sectors.
The Takeaway
The world is entering a phase where tariffs are embedded in economic strategy rather than used as temporary pressure points. As trade rules become more fluid, businesses and investors will need to stay nimble in navigating a more negotiated global order.