US Tariff Impact on Indian Exports
The United States has imposed a 25% tariff on all Indian-origin goods starting August 7, with varying penal duties on other countries between 10% and 41%. Key competitor nations, such as Pakistan, Vietnam, Bangladesh, and Turkey, face lower tariffs of 15-20%. This policy could potentially affect nearly half of India's $85 billion exports to the US.
Implications for India
- The order categorizes India among the most penalized countries, with no exemptions for critical sectors like pharmaceuticals, energy, and electronics.
- India and the US are in trade negotiations, with potential for tariff reductions contingent on agreements.
- Indian officials stress minimal impact, with existing US exemptions covering many Indian goods, such as pharmaceuticals and electronics.
- The tariffs might impact approximately $40 billion of exports, but the GDP loss is expected to be less than 0.2% even in the worst-case scenario.
- India maintains no concessions, especially in agriculture, dairy, and GM products, due to religious and other concerns.
Bilateral Trade Agreement Talks
- The US pressures India to allow more imports of farm, dairy, and GM products as part of the negotiations.
International Context
- The US tariffs apply differentially based on geopolitical risk, economic alignment, and trade volume.
- The EU has received concessions; tariffs on EU products will rise to a maximum of 15% if the current US tariff is below this threshold.
- Countries facing the steepest tariffs include Iraq and Serbia (35%), Switzerland (39%), Laos and Myanmar (40%), and Syria (41%).
The recent executive order is seen as part of a strategy to reduce the US trade deficit and is expected to influence global trade dynamics significantly.