
Analysis: How Will Trump’s 25% Tariffs On India Affect the Economy?
US President Donald Trump has signed an executive order slapping higher tariffs on dozens of trading partners ahead of the Friday trade deal deadline to reshape global trade in US favour. A varying import duty rates from 10 to 41 percent are set to start in 7 days, impacting 69 trading partners.
The tariffs ranged as high as 41 percent on Syria, 35 percent on many goods from Canada, 50 percent for Brazil, 25 percent for India, 20 percent on Taiwan, and 39 percent for Switzerland. Meanwhile, tariffs on Pakistan imports were slashed from 29 percent to 19 percent.
Trump’s announcement has evoked concern from economists, exporters, and industry leaders across India. Tariffs are typically taxes that are charged on goods imported from other countries. Exporters are indirectly impacted by the increased rate of tariffs as the taxes make goods costly for end consumers and lead to reduced demand.
A high tariff rate of 25 percent on India came after the negotiation over India’s agriculture sector failed, and drew a higher rate threat, including an unspecified penalty on India’s purchasing of Russian oil.
Meanwhile, India aims to protect and promote the welfare of farmers, entrepreneurs, and MSMEs (micro, small, and medium enterprises. The areas such as agriculture, dairy, and small sector protection become key sticking points derailing negotiations.
Notably, the US runs a $45 bn trade deficit with India, which Trump seeks to reduce. On several occasions, the US President Donald Trump has accused India of being a country with High Tariffs.
India and the US have held several rounds of negotiations for a trade deal over the past few months, with India agreeing to reduce tariffs on several goods, including Bourbon whiskey and motorcycles.
The decision to impose a 25% tariff on goods imported from India would hit India’s growth prospects. However, the extent of the impact on the economy is yet to be clear, considering the unspecified penalty in addition to 25%.
As per the experts, India’s GDP could take a hit of 0.2% as Indian stock markets reacted adversely to the news, with the opening in red as trade began after the announcement.
The high tariffs could put India at a loss in comparison to other Asian economies like Vietnam and China. India’s tariffs are no longer lower than these countries, which may create an unexpected diversion of export supply chains in sectors like textiles to India is now unlikely.
If tariffs persist, this may impact key sectors such as marine products, pharmaceuticals, textiles, leather, and automobiles, where bilateral trade has remained robust.
The tariffs will lead to price renegotiation between US buyers and Indian sellers to decide the fresh prices.