New Delhi, Apr 4 (KNN) The recently announced “Liberate America” tariffs by the United States are expected to have far-reaching consequences for global trade, with India among the nations facing potentially significant economic challenges.
While these tariffs reflect broader US trade policy shifts, their asymmetrical impact on trading partners warrants careful examination.
The trade relationship between India and the United States is characterised by a notable imbalance in dependency.
Only 2.8 percent of America’s imports originate from India, suggesting minimal disruption to US supply chains. However, with the United States accounting for 18.62 percent of India’s exports, the implementation of these tariffs represents a considerable economic challenge for Indian exporters.
Current trade figures indicate that India exports goods worth approximately Rs. 641,766 crores to the United States while importing goods valued at Rs. 349,318 crores.
The United States has justified these tariffs by citing its overall trade deficit of USD 1.2 trillion, resulting from imports of USD 3.3 trillion against exports of USD 2.1 trillion.
Yet notably, India’s trade surplus with the United States stands at a relatively modest USD 41.5 billion, significantly lower than China’s USD 270.4 billion, Mexico’s USD 157 billion, or Vietnam’s USD 113 billion surplus.
The 26 percent tariff on Indian goods will impact several key export sectors.
India’s exports to the United States span multiple industries, including electrical and electronics (Rs. 91,757 crores), gems and jewelry (Rs. 82,352 crores), pharmaceuticals (Rs. 66,909 crores), garments (Rs. 62,097 crores), machinery and tools (Rs. 51,058 crores), steel products (Rs. 23,128 crores), auto parts (Rs. 21,918 crores), minerals (Rs. 45,275 crores), organic chemicals (Rs. 19,941 crores), plastic products (Rs. 11,975 crores), rubber products (Rs. 7,505 crores), marine products (Rs. 15,758 crores), agricultural products (Rs. 10,000 crores), leather and footwear (Rs. 12,000 crores), and carpets (Rs. 9,000 crores).
The differentiated tariff structure may create certain opportunities for India, particularly given that Chinese imports face a higher 34 percent tariff.
This relative advantage could potentially benefit Indian exports in sectors such as machinery, iron and steel products, electrical and electronics, garments, and auto parts.
Immediate impacts will likely be felt most acutely in consumer-oriented and discretionary sectors.
Exports of garments, leather products, carpets, gems and jewelry, and food products may experience immediate declines as tariffs increase their retail prices in the US market.
Industries in Punjab that produce iron and steel products, garments, carpets, auto parts, leather goods, and plastic and rubber products are particularly vulnerable to these changes.
Conversely, essential products may demonstrate greater resilience to tariff increases.
Pharmaceuticals, machinery and tools, certain steel products, plastic and rubber products, minerals, organic chemicals, auto parts, and agricultural products may experience less immediate disruption due to their necessity-based demand.
The long-term implications of these tariffs extend beyond immediate trade flows.
By incentivising domestic manufacturing, these measures could accelerate reindustrialisation within the United States and gradually reduce America’s dependence on imports.
Additionally, India may face increased competition in its domestic market as exporters from China and other nations seek alternative destinations for their products, potentially resulting in dumping practices.
Given India’s existing trade deficit of approximately Rs. 20 lakh crores, this situation warrants consideration of protective measures.
The implementation of safeguard duties on imports from China and other countries may become necessary to protect domestic industries from market disruptions resulting from trade diversion.
(KNN Bureau)
