Rethinking America: What food delivery apps teach us about tariff wars

Namakkal doesn’t conjure up any vision of an uprising site, a la Meerut, where the Revolt of 1857 began. But in July this year, I came across a news item about a bunch of restauranteurs in Namakkal getting together to protest against Zomato and Swiggy’s practices that were hurting them.

 

Zomato and Swiggy are platforms. Platforms are a business that connect a large number of buyers with a large number of sellers. 

The question is what comes first: The buyers or the sellers? 

This is an interesting question. Our answer: If you are selling goods, the sellers come first. Think Amazon. If you are selling services (say, advertising), the buyers come first. Think Facebook. 

But for food delivery, which is a service delivering manufactured goods (food), Zomato, etc created (probably) both, kind of simultaneously: Its initial business of making restaurants list menus on its platform, created a large body of interested potential buyers. And then, when it got into food delivery, it sold this edge to the restaurants: “We have a massive bank of consumers.” 

That’s what has created the problem today for restauranteurs. They have been baited like a small deer baits the Komodo dragon for a Discovery shoot. 

You are right in asking: What on earth does food delivery have to do with tariff wars? 

Everything, actually. 

For a minute, forget that America is a country. Just think of it as a giant platform. 

But first, let's go back in time. America has actually had a very protectionist beginning. Starting from the Tariff Act of 1789 (made to generate revenue for the government since there were no income taxes then, and also to protect domestic industry from Britain), right till the (disastrous) Smoot-Hawley Act of 1930. 

The average tariff until that point remained comfortably in the 30-50 per cent range. This is what created a competitive America — in manufacturing, believe it or not. America started out being around 60-70 per cent of Britain’s size in the early 1800s. By the end of World War II, America had become four times Britain. Even more tellingly, on a per capita basis, America’s prosperity soared quite like the bald eagle, over that of the war-blighted United Kingdom and Europe.

 

This is when the buyer side of the platform business emerged from the womb via World War II’s Caesarian operation: The American consumer was now a force of nature, the Celtic goddess of abundance called Rosmerta.

 

The American consumer was the Olivia Newton-John of Grease: From a plain Jane to the leather pants’ chick everybody wanted to date. 

However, converse to what happens in an actual girl-chase, the entry price of dating the American consumer came down dramatically: Tariffs collapsed from around the 40 per cents in the ’40s to low single-digits in the golden, gilded, liberal era of the post-War boom, right till present day. 

The lost decade of the ’70s served as the broken marble steps to an opulent opera, a sybaritic era, beginning 1981, when the American consumer’s desires knew no bounds. Wall Street got this immediately, and shipped out jobs to China to make stuffed dolls and black stockings, and to India, to write code. America just wanted to consume, not produce. But that’s exactly what the buyer side of a platform business is supposed to do. 

China and India became the supply side of the platform. There were others, too. Actually, pretty much the entire world became Namakkal restaurants. Supplying goods and services to American consumers via that platform called America. 

The low tariffs acted exactly as low platform fees do: Lure sellers onto the platform — easy onboarding, no listing fees, next-to-zero commissions. Uber even paid drivers sign-on bonuses in the beginning. 

Of course, while the platform gets you onboarded with next-to-no fees, it does incur operating costs, and that’s what the burn is all about. For America, the burn has been its deficits, especially the trade deficit. From the 1980s onwards, trade deficits have averaged around 2 per cent to 3 per cent of gross domestic product (GDP), while in absolute terms, it was around $1 trillion in 2024.

 

So, here is what happened on the platform called America up until Donald Trump came in for the second time: Sellers had a great time. And buyers had an even greater time. The platform grew rapidly. But so did the burn.

 

The market started worrying about this just as it started to worry about Amazon in 2001. Can America, as a platform, survive?

And now, I hope, dear reader, you begin to see the peregrinations our minds have gone through in order to make all the seeming Donald Trump Truth Social drivel make sense. 

And make sense it does. 

Here is the way platforms turn profitable: They increase the take rates. Namakkal restaurants can protest all they want. Costs keep getting layered on top of costs. Sellers on the platform are hooked on to the platform simply because the platform has become a primordial force of thundering consumer herds. 

In reality, the platform is the Komodo dragon, but with velvet fangs you never realised had nerve poison dripping from them. When it bites you, you don't feel it immediately. But in some time, you will stagger and fall like Trevor Berbick against Mike Tyson. 

Go back and analyse the insidious, the pernicious — and did I hear that word “unfair”? — upward seepage of platform fees, right from Amazon to Uber to Zomato. Sellers are fish with the hook sticking out of their cheek. You can wriggle all you want, but there is no way out of this Houdini trap — not if you are a seller on the platform called America. If you are a seller on Amazon or Zomato, you at least have a fighting chance of going directly to the consumer. Or going to the Competition Commission of India.  You have no such path through the desert on the America platform. There is only one way in, and that is by paying high tariffs. 

The reality is that the only way America can cut the burn (we really doubt if it can turn “profitable”) is by increasing the take rate.  Read the parchments of the economic history of America. It ran surpluses — a lot — right through the era of high “take rates” ie, high tariffs. It was a surplus nation. It was free cash positive. 

From the Civil War through the early 20th century (1860s–1930s), US tariff walls averaged 35–50 per cent on dutiable imports. These protected American manufacturers (steel, machinery, textiles) from European competition. Behind those walls, US industry exploded in scale and efficiency. 

The result: Robust exports (farm goods, manufactured goods), and limited imports (luxuries, niche items). 

America’s trade balance recorded consistent surpluses. These surpluses brought gold and capital into America. 

By 1900, the US had flipped from a debtor (in the 1800s, it borrowed from Britain) to a creditor nation. 

By World War I, the US was the world’s banker — lending massively to Europe. By World War II, the pattern deepened: America ran huge surpluses financing Allies, and emerged as a net creditor superpower post-1945. 

Post-1945, tariffs fell (the General Agreement on Tariffs and Trade, the predecessor of the World Trade Organisation, was signed); the US opened markets; and rebuilt rivals because of the Marshall Plan. 

In the 1950s, trade was roughly balanced. 

In the 1960s–70s, small deficits began. 

Then came the era of Warren Buffett and Peter Lynch’s preachings: Keep the soft, fluffy, “asset-light” businesses. Ship the pick-and-shovel stuff to the Guantanamo Bays of commerce: Asia primarily. 

The bull market of the ’80s made Americans rich. But it made America poor. The US had shifted from net creditor to net debtor by the late 1980s. Capital flows became America’s lifeline (exactly like India’s) to plug its external deficits. 

The Platform’s new Board is tasked with fixing the burn. The rest of the world, especially folks in India and Brazil, can cry — and try — all they want. The fact remains that there is no alternative immediately visible, except to continue selling on the platform called America. 

High take rates have to be absorbed to whatever extent possible. Of course, the sellers on the platform called America can go looking for new markets. New markets do exist, but the problem is they exist only in large aggregates, not at individual consumer level disaggregations.

 

For example, India is a very large market for many things, but it comprises very small individual transactions, and that’s precisely where the problem lies for sellers: Small transactions are infinitely less profitable than large transactions, even if the total value of the transactions is identical in the two cases. 

Of course, the American consumer will also face higher prices and may, therefore, cut back on consumption. But in order for the platform to become less cash-guzzling, this price will have to be paid. Any platform’s road to profitability is built on the collective blood and gristle of its  sellers and buyers. 

The implications of the world’s largest platform increasing take rates are going to be profound for sellers on this platform. They will need to find the margins to absorb the new take rates. Crying that “he’s a madman” or “America is behaving like a bully” will only sound like the whining Gotham of Dark Knight. Because America is Javier Bardem in No Country for Old Men saying,

“You think you can bargain? No. The coin decides.” 

Just the little thing that the coin isn’t a fair coin. It is controlled by the Platform.

 

Shankar Sharma is a well-known investor and founder of GQuant FinXRay. Amit Bhartia is a seasoned global fund manager, and was earlier with GMO, a US fund house