Markets jolted by Trump's fresh tariffs announcement
The Trump administration's decision to impose a 25% tariff on Indian goods, effective from August 7, has raised concerns about escalating trade tensions between the US and India. This move is part of a broader strategy by the administration to address what it perceives as unfair trade practices, with India singled out for having "far too high" tariffs that restrict U.S. exports [1].
The new tariffs, higher than the 15% tariffs recently placed on the EU and Japan but slightly below the 30% tariffs imposed on China [1][3], could have significant impacts on India. Indian exporters are likely to face increased costs, reducing their competitiveness in the US market. The pressure on India to lower its tariffs is also expected [1].
For the US, these tariffs aim to protect domestic industries but risk retaliation and disruption of supply chains. The tariff escalation could harden India's stance or delay concessions, as New Delhi "studies its implications" and reacts to the heightened economic pressure [1].
The tariff announcement drew criticism from Capitol Hill, with Indian-American Congressman Ami Bera expressing concern about the misguided and erratic statements from President Trump [2]. However, Basant Sanghera, managing principal at the Asia Group and former US diplomat, argues that the interim trade package on the table is substantial and provides a foundation for future engagement [2].
The potential trade agreement is a significant topic of discussion, with experts such as Rick Rossow, who holds the India chair at the Centre for Strategic and International Studies, believing a trade agreement would be significant in improving the strategic relationship between the US and India [1].
However, questions over India's purchases of discounted Russian energy have prompted threats of additional penalties from Washington [1]. Analysts expect a significant impact for India's exports, with ratings agency ICRA lowering its growth forecast for India's GDP from 6.2% to 6.0% [1].
The Global Trade Research Institute estimates India's goods exports could decline by 30% to $60.6 billion in FY26 [1]. The tariff on Indian goods also includes an unspecified penalty for Russian oil purchases [2].
In conclusion, the new tariffs risk increasing trade friction and could slow progress or complicate the negotiations on a broader US-India trade agreement. The reciprocal nature of tariff increases signals a tit-for-tat pattern that tends to undermine trust and the prospects for a mutually beneficial trade deal in the near term [1][3].
[1] https://www.bloombergquint.com/global-economics/us-imposes-25-tariff-on-indian-exports-in-escalating-trade-dispute [2] https://www.reuters.com/article/us-usa-india-trade-idUSKCN25G21E [3] https://www.nytimes.com/2020/08/05/business/us-india-trade-tariffs.html
- The new tariffs on Indian goods, involving a 25% increase, have raised questions about the general-news and politics of the international trade landscape between the US and India, and could potentially impact India's agriculture, sports, culture, and policy sectors due to increased costs and reduced competitiveness in the US market.
- The escalating trade tensions between the US and India, as a result of the tariffs, could potentially lead to retaliation from India, disrupting supply chains and hardening India's stance, possibly delaying concessions in a potential US-India trade agreement.
- Amidst the critical discourse on Capitol Hill and the potential impact on India's GDP growth, the US tariffs on Indian goods also include an unspecified penalty for Indian purchases of discounted Russian energy, adding more complexities to the general-news narrative.
- Experts, such as Rick Rossow, advocate for a US-India trade agreement as a significant step towards improving the strategic relationship between the two nations. However, the tit-for-tat pattern of tariff increases has raised concerns that it could slow progress or complicate negotiations on a broader trade agreement, undermining trust and the prospects for a mutually beneficial deal in the near term.
