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In face of US tariffs, global volatility, India must maintain a steady hand | Current Affairs | Vision IAS

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In face of US tariffs, global volatility, India must maintain a steady hand

2 min read

US-India Trade Relations: Challenges and Strategic Considerations

US-India trade relations, built on democratic values and strategic convergence, are entering a more challenging phase due to various economic and geopolitical factors.

Imposition of Tariffs

  • The US has imposed tariffs exceeding 25% on Indian exports, which complicates trade negotiations.
  • Indian exports to the US, though only over 2% of India’s GDP, are significant in sectors like textiles, chemicals, pharmaceuticals, and auto components.
  • The tariffs could lead to a potential loss of up to $30 billion in export earnings.

Geopolitical Dynamics

  • India's energy and defense ties with Russia are a source of unease for the US.
  • India increased its oil imports from Russia due to wartime discounts, but these discounts are reducing, providing room for diversification.
  • India is exploring new sources, including LNG and crude oil from the US.

Economic Considerations

  • India's economy is cushioned by strong domestic consumption, unlike many export-reliant economies.
  • Rising financial uncertainty, capital outflows, and a weakening Rupee add pressure.
  • The Reserve Bank of India faces challenges in balancing inflation, interest rates, and exchange rate dynamics.

Defense and Strategic Partnerships

  • India is addressing its defense procurement dependency on Russia through indigenous production and partnerships with Western countries, including the US.
  • This shift in defense procurement could strengthen strategic ties with the US.

Global Trade Dynamics

  • US tariff actions affect not only India but also allies like the UK, EU, Japan, and Vietnam.
  • India must engage in smart bargaining to leverage its strategic importance without sacrificing domestic priorities.
  • Potential "mini-deals" should address structural issues like agriculture, energy access, and technology.

Economic Strategy and Future Outlook

  • India’s market fundamentals remain strong despite short-term volatility.
  • Strategic sectors like financial services, consumer goods, and technology are insulated from trade tensions.
  • India's lower export dependency gives it strategic flexibility, but it must avoid complacency.
  • India needs to balance its energy sources, defense partnerships, and trade positions to remain resilient and influential globally.
  • Tags :
  • US-India Trade
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