US-India Trade War and Tariff Challenges

US President Donald Trump has announced plans to impose reciprocal tariffs on India and other nations starting April 2, as a response to what he perceives as high import taxes on American goods.

Potential Impact on Indian Exports

• Key sectors affected could include: 
  • Automobile parts
  • Electronics
  • Textiles
  • Diamonds and jewellery
  • Chemicals and pharmaceuticals
• The US is a significant trading partner, with India exporting $77.51 billion and importing $42.2 billion during FY24.

Response and Strategy

• Commerce and Industry Minister Piyush Goyal is visiting Washington to negotiate and potentially kickstart a Bilateral Trade Agreement.
• India is considering reducing tariffs on industrial products if the US reciprocates for Indian goods.
• Agricultural products might be excluded from tariff reduction proposals.

Challenges and Concerns

• Trump's tariffs cite unfair import duties by nations including India, with auto tariffs reportedly over 100%.
• India's weighted average tariff on US goods is 7.7%, while US tariffs on Indian goods stand at 2.8%.
• Concerns extend to non-tariff barriers and local taxes such as GST.
• Key products like motorcycles, apples, and almonds face high import levies in India.

Efforts to Mitigate Impact

• The Indian government is consulting stakeholders and studying the potential impact of US tariffs.
• Proposals to the WTO for a goods-only trade agreement are being considered.
• There is a need for continuous government support in export credit and technology to maintain competitiveness.

Additional Considerations

• India's response to the US Trafficking Victims Protection Reauthorization Act is crucial, as it impacts exports linked to child labour concerns.
• Understanding the implications of countervailing and anti-dumping duties is essential.

The coming weeks are critical for India to strategize and minimize the potential economic impact of the US tariff measures.