US President Donald Trump celebrated America’s “Liberation Day” on April 2 by announcing “reciprocal tariffs” against all major trading partners. The US runs a trade deficit of around $1.2 trillion. Trade deficit is the difference between the value of goods the US exports and the value of goods the US imports. A trade deficit (shown with a minus sign) of more than a trillion dollars means the US imports a trillion dollars worth more of goods than it exports.
How Trump’s Reciprocal Tariffs Could Hurt India ?
Why In News
- US President Donald Trump celebrated America’s “Liberation Day” on April 2 by announcing “reciprocal tariffs” against all major trading partners. The US runs a trade deficit of around $1.2 trillion. Trade deficit is the difference between the value of goods the US exports and the value of goods the US imports. A trade deficit (shown with a minus sign) of more than a trillion dollars means the US imports a trillion dollars worth more of goods than it exports.
What Was Announced?
- India has been smacked with a tariff rate of 26%. Trump shared a report of the US Trade Department that gave details of why each country was being tariffed. The report came down heavily on the Government of India’s increasingly protectionist stance since 2014.
What Does India Export, Import From The US
- India’s primary exports to the US include pharmaceuticals, telecom equipment, gemstones, petroleum products, gold jewellery, and ready-made cotton garments. On the import side, key commodities include crude oil, coal, petroleum products, electric machinery, and aerospace components.
Hardest- Hit Indian sectors
- Among the worst affected by the 26 per cent tariff are India’s electronics and gems and jewellery sectors. The US imports nearly $14 billion worth of electronics and over $9 billion worth of gems and jewellery from India, making these industries particularly vulnerable.
- Prior to this hike, Washington’s tariffs on Indian electronic goods averaged just 0.41 per cent, while jewellery and gem products faced duties of around 2.12 per cent. Auto parts and aluminium exports, however, remain outside the scope of the latest 26 per cent levy, though they continue to be subject to the previously announced 25 per cent tariff.
Sectors Exempt From Trump Tariff
- Pharmaceutical products and energy exports, which collectively account for nearly $9 billion in trade, have been exempted from the new tariff structure, bawd on an executive order signed by Trump. Trump had earlier said the pharma industry would face tariffs, hinting that levies could appear in the future.
- Products exempt from import tariff in the US include:
- Copper, pharmaceuticals, semiconductors, and lumber
- Bullion: Precious metals like gold and silver are exempt.
- Energy and minerals: Certain energy products and minerals that aren’t available in the US will also be excluded.
Indian Textiles May See Advantage
- India may be in a relatively advantageous position when compared to other nations. Vietnam faces a staggering 46 per cent tariff on its textile exports, while Bangladesh and China are subject to 37 per cent and 34 per cent, respectively.
- Given that textiles contribute only 2 per cent to India’s gross domestic product (GDP), compared to 11 per cent for Bangladesh and 15 per cent for Vietnam, the impact on India’s overall economy may be milder.
How India Fares Against Competitors
- Ministry of Commerce on Thursday said that while they were still analysing the impact of the tariffs, it was a “mixed bag and not a setback for India,”.
- Federation of Indian Export Organisations (FIEO) reiterated the sentiment, adding that India is in a better position than many other trading partners. FIEO Director General and CEO Ajay Sahai, “We have to assess the impact, but looking at the reciprocal tariffs imposed on other countries, we are in a lower band.”
- Other Asian economies have been hit even harder, with China’s overall export tariff to the US standing at 34 per cent, Japan at 24 per cent, Thailand at 36 per cent, Malaysia at 24 per cent, Taiwan at 32 per cent, and South Korea at 25 per cent. Vietnam has been hit the hardest with a 46 per cent tariff. These higher tariff rates could create new trade opportunities for Indian exporters.
Other Countries
