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Informist, Thursday, Apr. 3, 2025

 

By Krity Ambey

 

NEW DELHI – US President Donald Trump's reciprocal tariffs, which will make Indian goods 27% more expensive for American buyers from Wednesday, are expected to have a mixed and short-lived impact on outbound shipments from domestic shores, experts said. At the same time, they flagged the possibility of a potential rejig in India's export share to the US.

 

While the landing cost of products from certain sectors may rise due to the tariff hike, India could gain market share in the US due to the expected duty advantage against its Asian rivals, Federation of Indian Export Organisations' Director General Ajay Sahai said. These sectors include electronics, apparel, footwear, furniture, and gems and jewellery--areas in which India battles against China, Vietnam, and Indonesia, countries which have been slapped with a higher rate of tariff.

 

"We expect that after some time, US importers would move away from those nations and pick India," Sahai said. In 2024, India had a share of 2.8% in US' total imports as against China's 14.0%, Vietnam's 4.4%, and Thailand's 2.0%.

 

At the same time, India faces an uphill task in staying competitive in the new era of higher tariffs when it comes to matching up against Ecuador in shrimps, European Union in medical devices, and Turkey in carpets, Sahai added. While the European Union would have a tariff advantage of 7% against India, the US has not imposed any reciprocal tariffs on Ecuador and Turkey.

 

To be sure, India's exports of electronics goods, gems and jewellery, apparel, and leather make up more than 30% of its total exports to the US, compared to 5% from shrimps, carpets, and medical devices. However, the high tariff imposed on Asian competitors, including China, could encourage them to diversify their export market and look to India. This would force India's Directorate General of Trade Remedies to stay on its toes and monitor the dumping of goods into the Indian market, Gautam Khattar, principal at Price Waterhouse & Co LLP, said. "Fortunately," Khattar said, "India already has a robust mechanism to monitor dumping".

 

In some more good news for India, the White House has not imposed reciprocal tariffs on certain sectors such as pharmaceuticals and petroleum. Thanks to this, almost 20% of India's exports to the US will be unaffected, Khattar pointed out. "It is now on the government to ensure that they safeguard a bigger chunk of exports from the remaining 80% through the bilateral trade agreement."

 

The Indian government is pinning its hopes on the proposed bilateral trade agreement with the US to navigate what is being described as a global tariff war, with both nations having agreed to negotiate a multi-sectoral pact whose first tranche may be launched by the final few months of 2025. This has led to expectations that the impact of the reciprocal tariffs would be short-lived for India. The possibility of a bilateral trade agreement with the US also suggests Washington may eventually lower tariffs for India, Barclays' economists said in a report Thursday.

 

With the tariffs only coming into effect next week, a window of opportunity remains and Indian trade officials could move into mission-mode engaging in urgent discussions on the bilateral trade agreement and request a deferral of the timeline for India, according to Anurag Sehgal, managing director at Price Waterhouse & Co LLP. "India has already been working proactively to avert or minimise the impact of these tariffs since January by cutting duties on bikes, bourbon whiskey, and ethernet switches, as well as scrapping the equalisation levy," Sehgal, formerly an official in the Indian trade ministry, said. A current trade ministry official confirmed discussions with the US on the agreement would continue throughout April. The official added that India is not in favour of taking retaliatory measures, with the US a key trading partner. In the first 11 months of 2024-25 (Apr-Mar), the US had a share of 19% in India's total outbound shipments. India exported goods worth $76.38 billion to the US in Apr-Feb, and had a trade surplus of $34.75 billion.  End

 

US$1 = INR 85.43

 

Edited by Deepshikha Bhardwaj

 

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