These tariffs are in addition to the 25% tariff on Indian imports that were imposed by USA earlier, affecting two-thirds of exports by value to USA.
- This comes amidst India-USA 2+2 Intersessional Dialogue involving Ministry of External Affairs and Ministry of Defence of both countries.
- They agreed to increase defence cooperation, including signing a new ten-year Framework for the U.S. India Major Defense Partnership.
Impact of high tariffs on India
- Exports: GTRI estimates product exports to the US could fall to $49.6 billion in 2025-26 from nearly $87 billion in 2024-25.
- Most Affected Industries: These include low-margin and labour-intensive industries including gems and jewellery, textiles and apparel, shrimp, and auto components.
- Loss of competitiveness: Indian products will be more expensive making them uncompetitive against exports from lower duty countries like Vietnam, Bangladesh, and Mexico.
- Foreign Inflows: FDI inflows in export-oriented sectors may decline and FPIs may cause volatility in equity and debt markets.
Way Forward
- Reinstate Interest Equalisation Scheme providing MSMEs with low-cost export credit in times of high interest rates.
- Introduce targeted credit lines for shrimp, apparel, jewelry, handicrafts and high-impact industries.
- Enhance Export Incentive Schemes such as RoDTEP and ROSCTL to support liquidity and accelerate market diversification and lead sector-specific trade missions.
- Simplified regulatory processes and rationalised duties on critical raw materials like cotton, leather, and gem inputs.
