US President Donald Trump has announced sweeping reciprocal tariffs of 27 per cent on India that has sent the government in a huddle to study its implications to help affected sectors and also identify possible opportunities flowing from the new tariff order.
New Delhi is also looking at “expeditious conclusion” of the India-US bilateral trade agreement (BTA) negotiations that is set to deliver the first tranche of results by September this year, according to a Commerce Department statement.
Sectors to be hit
Indian exporters across sectors, such as textiles, chemicals, agricultural products, gems & jewellery, machinery, electronics, and electricals, are worried about the steep tariffs affecting future prospects. But much higher rates of reciprocal tariffs on competing countries such as China, Vietnam, Bangladesh and Cambodia, is a reason for hope as it gives India the competitive edge in some areas, officials said.
“A close coordinated group has been set up by the Commerce Department with nodal officers from all line Ministries to examine the impact of Trump’s executive order on various sectors and also to put in place a future plan of action. Ministries and Departments are engaged with exporters from sectors that may take a hit, such as shrimps or gems & jewellery, to look at various ways to help them out,” a senior government official told businessline.
India is hopeful that the reciprocal tariff issue will be sorted out in the BTA discussions through “carve-outs” for the country and a mutually beneficial outcome will emerge with India offering greater market access to the US in sectors of its interest such as automobiles, motorbikes, alcohol and at least some agricultural items, another source said.
Since US is the largest trading partner and export destination for India, with exports of goods at $77.51 billion and imports at $42.19 billion in FY24, it does not want to get into a tariff fight with by taking retaliatory actions, the source added.
On automobiles
Trump’s `Liberation Day’ tariff announcement, made from the White House Rose Garden on Wednesday evening (early Thursday morning in India), also included confirmation of a 25 per cent levy on vehicles not assembled in the US, and on auto components.
“Keeping in view the vision of Viksit Bharat, the Department is engaged with all stakeholders, including Indian industry and exporters, taking feedback of their assessment of the tariffs and assessing the situation. The Department is also studying the opportunities that may arise due to this new development in the US trade policy,” the release said.
Elaborating on India, Trump remarked that the situation was very, very tough. “The PM, he just left, is a great friend of mine. I told him you are a great friend of mine but you have not been treating us right. They charge us 52 per cent..,” Trump said.
India is subject to a baseline tariff of 10 per cent between April 5-8. Then the tariff will rise to a country-specific 27 per cent starting April 9. The exempted sectors include pharmaceuticals, semiconductors, copper, and energy products.
Trump said that through the imposition of reciprocal tariffs, he aims to promote manufacturing in the US and provide Americans a level playing field ending “years of unfair trade practices”. The reciprocal tariffs have not just been calculated on the basis of the tariffs imposed by the partner countries but also seems to have factored in the trade deficits US has with these countries, the official said.
Apart from tariff reduction, the US has also been pressuring India to address non-tariff barriers such as import restrictions, quality control and sanitary & phytosanitary norms.
The BTA being negotiated by the two countries is expected to more than double bilateral trade to $500 billion by 2030.
Global markets down
However, domestic stock markets showed resilience even as global stock markets tumbled sharply. The BSE Sensex closed at 76,295.36, down 322.08 points or 0.42 per cent from its previous close, while the Nifty50 settled at 23,250.10, losing 82.25 points or 0.35 per cent.
The broader market outperformed the benchmark indices, with the Nifty Midcap 100 and Nifty Smallcap 100 indices closing with gains of 0.21 per cent and 0.58 per cent, respectively. Market breadth remained positive, with 2,813 stocks advancing and 1,169 declining on the BSE.
Meanwhile Japan’s Nikkei plunged 2.8 per cent and Vietnam’s index crashed 6.8 per cent. Dow, Nasdaq also opened in deep red at opening in the US.
Rupee gains against dollar
The rupee on Thursday appreciated in the wake of dollar weakening against global currencies amid tariff wars and inflows into the Indian markets.
The rupee closed at 85.43 per US dollar, up about 7 paise, versus previous close of 85.4975.
Source from: https://www.thehindubusinessline.com/economy/trump-imposes-27-reciprocal-tariff-on-indian-exports/article69405918.ece
