Donald Trump's tariff to take effect: Impact on Indian trade and economy decoded
&imwidth=600&imheight=450&format=webp&quality=medium "Donald Trump's tariff to take effect: Impact on Indian trade and economy decoded")
A man in the US with Donald Trump's mask. Photograph: (AFP file)
Donald Trump's 50 per cent tariff hike on India will take effect later this week. How will it impact Indian businesses and the economy? According to experts, it may also impact India's growth story. Here's a look.
US President Donald Trump's tariff hike on India will take effect on August 27. His administration imposed a hike of 50 per cent on Indian exports to the United States to penalise New Delhi for buying Russian oil and weapons. It will impact India becausethe US is its largest export market.
A 50 per cent tariff will make Indian exports to the US less competitive than those made by Vietnam, Bangladesh, and Mexico.
Several US politicians have accused India of financing Russia's war in Ukraine by buying discounted oil and weapons. India says it is only ensuring its energy security and is doing what is good for its people.
According to reports, due to the announcement of the tariffs, textiles and apparelorders are being diverted to other Asian exporters. India's gems and jewellery shipments have also been halted, reported Business Standard. Auto parts, pharmaceuticals, and electronics items are also under strain because of margin woes.
In the financial year 2024, New Delhi shipped goods worth $86.5 billion, which is 20 per centof India's total exports of merchandise.
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If the tariffs continue, experts believe that in the long run, New Delhi's shipments could decline by 40 to 50 per cent. This will erode India's foreign exchange earnings.
Per the paper, if the tariffs on India's US exports continue, the Indian economy's annual growth might be 0.2-0.4 percentage points lower. It could also reduce investments in the Indian economy, exacerbatingthe already delicate situation.
The Ministry of External Affairs has described the move as “unfair and unreasonable". New Delhi, however, hasn't reacted with reciprocal tariffs. However, there hasn't been any major reduction in purchasing Russian oil. In July, India was the second-largest Russian oil importer after China.