The US president, Donald Trump, has announced an additional 25% tariff on Indian
exports. It is his way of penalizing India for purchasing Russian oil. Recently, India has
become a major target in the US’s move to create pressure on Russia over the Ukraine war.
The purpose is to reduce Russia's oil revenues and force the Russian government to a
ceasefire.
The new rate will be applicable in India after 21 days, and now India has become the most
heavily taxed US trading partner in Asia. Around $86.5bn in annual goods exports to the US
are expected to be unviable if these rates are continued.
India has always insisted that its imports are driven mostly by market factors and vital to
its energy security, but Trump's Tariffs threaten to hit the country’s exports and overall
development hard. Indian exporters have already mentioned that they are unable to carry
on with a 10-15% rise in tariff. So a combined 50% tariff is going to be very far from their
capacity.
Experts believe that if India does not negotiate with the US immediately, there is going to
be "a trade embargo and it will cause a sudden stop in affected export products."
Here are some major industries affected by Trump's Tariffs:
Steel and Aluminium
With the implementation of tariff rates, Indian exporters shipping steel, aluminum, and
processed goods will face higher costs. Most firms are thinking they cannot survive in the
U.S. market with the additional cost burden of the Trump Tariff.
Electronics and Pharma
For now, the exports are exempt from additional tariffs. However, the impact would be felt
in India domestically, "with labor-intensive exports like textiles and gems and jewelry
taking the fall," Priyanka Kishore of Asia Decoded, a Singapore-based consultancy, told the
BBC.
Indian Textile Industry
For the textile industry, these new tariffs are called a "huge setback" for the exporters. They
are going to face tough competition in the US market.
Tech Spending
According to experts, a major consequence of the recent Trump Tariffs can be a reduction
in discretionary tech spending by US clients due to the higher cost of goods. Further, the
uncertain market conditions may prompt budget tightening.
Additionally, the US firms might scale back IT outsourcing from India, and the export-heavy
IT services might be affected.
Compliance Challenges
After the new Tariff, Indian firms are facing new compliance and regulatory issues. Now,
they need to fit with the new concept in taxation, more paperwork, and additional duties at
border crossings. All these steps have increased the cost of working, making it tough for
companies to streamline their export procedure.
Positive Side: Emerging Opportunities
Trump Tariffs have presented several new opportunities for businesses in India. As
America is looking for substitute supplies to China, Indian industries like pharma, IT
services, and automobile parts are expected to see greater demand. This transition will
provide Indian exporters with new prospects for growth.