The most recent Emkay report estimates that India might lose round $6 billion (0.16% of its GDP) in exports to the US if tariffs are set at 10%. If the US will increase the tariff to 25%, the influence might rise considerably to $31 billion.
“Whereas the character of reciprocal tariff implementation is unclear, we imagine a broad country-level tariff by the US is the almost certainly situation, given issues round sector/commodity-level tariffs. India might be among the many worst hit nations as per broad reciprocal differentials,” flagged the report.
This can be a substantial sum contemplating India’s present export trajectory, with the US being considered one of India’s largest buying and selling companions. Nonetheless, regardless of the looming challenges, there are nuanced views and alternatives inside the sectors almost certainly to be impacted.
A blended bag for India
The Emkay report categorises India’s key export sectors into these extra susceptible to the tariff hikes and people which might be higher positioned.
Among the many most susceptible sectors are attire and gems/jewelry, that are uncovered to the total brunt of the tariffs.
These industries face steep losses if the US goes forward with broad country-level tariffs, as anticipated. However, sectors comparable to auto components, prescription drugs, and electronics are higher ready than initially feared.
Specifically, the auto business in India stands to be considerably impacted, because the US is ready to levy a 25% tariff on totally assembled automobiles beginning on April 3. In the meantime, auto components are dealing with comparable tariffs by Might 3 which stands to be worrisome because the US is India’s single-largest export marketplace for it.
In line with an ET report, the Centre has already begun gathering information from the auto components business to evaluate the total influence of those tariffs. The brand new levies pose a major problem to the roughly $6.79 billion value of automobile components India exports to the US.
Trade stakeholders are pushing for better readability on the tariffs’ utility, notably with regard to the specifics of which components will probably be focused, stated the ET report.
The tariff tango
India just isn’t sitting idle.
In an try and mitigate the influence of US tariffs, India has proactively provided tariff cuts on a spread of US imports, notably agricultural merchandise.
In latest negotiations with the US, India has proposed decreasing tariffs on objects like almonds, cranberries, and bourbon whiskey—key US exports which have been recognized as a part of the broader commerce talks.
Reuters has reported that India is prepared to supply tariff cuts on greater than half of US imports value $23 billion, marking the most important concession in years.
In truth, in line with the information company, the Central authorities’s inside evaluation signifies that 87% of India’s exports to the US, which complete round $66 billion, might be affected by reciprocal tariffs. To stop these disruptions, India’s provide is critical, probably reducing or eliminating tariffs on imported US items starting from 5% to 30%, totalling over $23 billion in worth.
These strikes come as India makes an attempt to fend off the total weight of the tariffs the brand new US President is threatening to impose.
Shifting gears
Whereas India faces appreciable challenges as a consequence of these fearsome tariffs, there are additionally strategic alternatives to discover.
In line with Emkay, India’s place in world worth chains, notably post-Covid, stays comparatively small compared to China. Nonetheless, the US’ tariffs on China and different international locations, together with Mexico and Canada, current potential openings for India.
The commerce warfare has created a vacuum, particularly within the low-skill product classes beforehand dominated by China.
Emkay notes that India has made marginal progress in high-skill product worth chains however has but to seize a major share of the house vacated by China. India’s greatest probability lies in gaining market share from international locations like Mexico and Canada, which have extremely built-in provide chains with the US.
Furthermore, India can take a extra aggressive strategy in negotiations, notably within the power and defence sectors, the place there are clear alternatives to counterbalance tariff impositions.
India’s openness to importing extra US defence gear and power sources, coupled with discussions on reducing tariffs on overseas electrical autos (EVs), might be leveraged as a part of the continuing negotiations to mitigate tariff impacts.
Broader commerce ambitions
Whereas the instant focus is on the implementation of tariffs, the broader image stays India’s ambition to double bilateral commerce with the US to $500 billion by 2030 from the present $190 billion.
Each international locations have set a goal to conclude the primary part of the commerce settlement by the top of 2025, with the objective of eradicating a number of commerce limitations and paving the way in which for enhanced collaboration.
Regardless of the looming tariffs, Niti Aayog’s Pravakar Sahoo has stated that the plan could have minimal influence on India and acknowledged the alternatives it’d current. He famous that in contrast to Mexico, China, and Canada, which account for 50% of US imports, India is best positioned.
The Emkay report additionally exhibits that whereas the instant results are important, India’s long-term commerce relationship with the US will proceed to evolve, and cautious negotiations might flip these challenges right into a stepping stone for future development.
