India braces for the impact of Trump’s tariffs, set to take effect on April 2
As April 2 approaches, India braces for the implementation of US President Donald Trump’s reciprocal tariffs, a move poised to reshape the economic landscape between the two nations. These tariffs aim to equalise the duties imposed by countries on US exports, targeting nations with higher tariffs on American goods.
President Trump has criticised countries like India for imposing substantial tariffs on US products. He made it clear recently when he said that he believed they (India and others) are probably going to be lowering those tariffs substantially, but on April 2, and that he would be charging them the same tariffs they charge US. The reciprocal tariffs are designed to pressure countries into reducing their tariffs to match those of the United States.
The introduction of these tariffs could have several implications for India. Firstly it is going to affect India’s Gross Domestic Product (GDP) in a big way. Analysts predict a potential reduction in India’s GDP growth by 5 to 10 basis points from the current estimate of 6.6 per cent. The key industries such as gems and jewelry, pharmaceuticals, and automobiles, which have significant export volumes to the US, may face increased duties, affecting their competitiveness and profitability. Moreover, the Indian steel sector is particularly vulnerable. With the US imposing a 25 per cent tariff on steel imports and if India lowers its steel import duties there are genuine concerns about cheaper Chinese steel flooding the Indian market and damaging the Indian steel industries.
Indian government is yet to figure out how to reciprocate as the Trump’s deadline is just ten days away. The best bet is diplomatic negotiations but at the moment the US President is adamant on going ahead with his plans to wage the trade war on nations who do not comply with his dictums. Indian officials have been in talks with their US counterparts to negotiate and potentially mitigate the impact of the tariffs. India has proactively reduced tariffs on certain US goods, such as motorcycles and bourbon whiskey, to address US concerns and foster goodwill. However, lowering the import duties across the sectors would be disastrous for Indian industry.
The best bet in this scenario, as other countries are also exploring and experimenting is to find alternative markets and increase South South Cooperation (SSC). Efforts are underway to explore alternative markets for Indian exports to reduce dependence on the US and mitigate potential revenue losses. But the problem is far grave as the ripple effects of the tariffs extend beyond direct trade. Increased US tariffs could lead to uncertainty, affecting foreign direct investment inflows as investors may adopt a cautious approach.
Trade tensions can lead to volatility in currency markets, impacting the Indian rupee’s value against major currencies. Higher tariffs on imported goods could lead to increased prices for consumers, affecting purchasing power and overall consumption. As the deadline approaches, India’s preparedness and strategic responses will be crucial in navigating the challenges posed by the US reciprocal tariffs.
India has a strong economic foundation, and while the impact of these tariffs may be challenging, the country is well-positioned to weather this unprecedented situation.
Moreover, as other affected nations like China and Canada devise strategies to mitigate the impact, India can draw valuable lessons from their responses to navigate the evolving trade scenario.
