As US President Donald Trump mandates a 27 percent tariff on Indian goods to his country, economists and economy watchers have opined that Indian exporters will face relatively less trouble. Amongst major Emerging Markets in Asia, India’s tariffs are the lowest, barring the Philippines.
According to economic experts, India will be less impacted because its economy is inward-looking compared to export-dominated nations like China, Japan, Vietnam, and Sri Lanka.
“This is expected to have a significant impact on US inflation and global trade dynamics. Exporters from India are likely to face relatively less trouble, as amongst major EMs in Asia, tariffs on US imports from India is the lowest (26%+ 10% baseline) barring Philippines (17%+10% baseline),” said Sonal Badhan, Economics Specialist at Bank of Baroda.
Reacting to the tariff announcements, industry body ASSOCHAM added that the tariff will bring a major realignment in global trade.
“Tariffs unveiled by President Trump last night would bring a major realignment in global trade and manufacturing value chains. India has been placed somewhere in the middle of the tariff rates at 26 per cent in addition to 10% baseline duties, which needs to be assessed for real impact,” said ASSOCHAM President Sanjay Nayar.
“Amidst all these, inward dependent economies like India should focus on bank liquidity so that they can lend freely to domestic retail borrowers and small business owners, to keep domestic consumption intact,” said Debopam Chaudhuri, Chief Economist at Piramal Group.
Kunal Chaudhary, Tax Partner EY India, opined that tariffs imposed on Indian goods exported to the US present a dual-edged scenario for India’s manufacturing sector.
“On the one hand, the relatively lower tariffs on Indian goods compared to those from China, Thailand, and Vietnam create a favourable arbitrage opportunity for Indian exports. However, on the other hand, Indian manufacturers may face intensified competition in other markets, as countries that traditionally focus on the US market may redirect their efforts to other countries to fill the potential void,” said Chaudhary.
Under the imposed tariffs, goods from India will face a 25 percent tariff on steel, aluminium, and auto-related goods and no tariffs on pharmaceuticals, semiconductors, copper, or energy products. For the remaining products, India will be taxed a reciprocal tariff of 27 per cent and not 26 per cent, as reported.
