Potential Impact of US Tariff on Indian Exports
India is at risk of facing a significant tariff on its exports to the United States due to a proposed bipartisan Bill backed by President Donald Trump. This Bill, part of the "Sanctioning Russia Act of 2025," targets countries buying cheap Russian crude oil.
Key Details of the Proposed Bill
- Purpose: Imposes sanctions and tariffs on countries trading energy with Russia.
- Implications: Could jeopardize the trade deal between India and the US, affecting particularly software company exports.
- Current Tariffs: US has already imposed a 50% tariff on 55% of India's merchandise exports, with 25% linked to Russian oil purchases.
Trade Statistics
- US-India Trade: Bilateral trade in goods and services in 2024 was about $212.3 billion, with goods trade at $128.9 billion and services trade at $83.4 billion.
- Potential Impact: A 500% tariff could effectively halt India's exports to the US, exceeding $120 billion annually.
Economic Implications
Ajay Srivastava of Global Trade Research Initiative suggests that while US customs can levy tariffs on goods, there's no legal mechanism for services. However, Indian service exports, particularly in IT, could still be taxed indirectly.
- Resilience: Despite current tariffs, India's exports to the US grew by 11.3% to $52 billion during April-November.
- Macroeconomic Effects: Harsimran Sahni warns of potential broader impacts, including slowed economic growth and inflation management challenges due to higher energy costs.
Current Status and Expert Opinions
Trade discussions between the US and India paused in December, with no current plans to resume. Experts express concern over the Bill's potential to disrupt trade and broader economic stability.
