New Delhi: Navigating the Turbulent Waters of Tariffs
After the US imposed reciprocal tariffs on India, there’s mixed sentiment among Indian businesses. While some see a chance to gain a foothold in global markets, others are worried about the challenges ahead.
Ajay Sahai, the Director General of the Federation of Indian Export Organisations (FIEO), shared insights on how these tariffs could shake up trade. He urged the Indian government to provide relief for struggling exporters. If trade between India and the US flourishes, it could lead to better conditions for Indian businesses.
Sahai noted that the full effects of these tariffs might take three to six months to unfold. Interestingly, India might benefit because tariffs on Chinese goods are significant—making Indian exports comparatively cheaper for American consumers. However, India’s exports still lag in many regions, like Europe, where competition is stiff.
From the consumer’s perspective, Sahai pointed out that while immediate effects on Indian shoppers might not be clear, struggles in the export sector could eventually hurt prices and availability of goods domestically.
Insights from Experts
Experts caution that the tariffs could impact India’s economic growth. Aditi Nayar, Chief Economist at ICRA Limited, highlighted that the US tariff rate stands at 27%, lower than those imposed on countries like China (34%) and Vietnam (46%). Nayar observed that certain sectors, such as steel and auto components, might face negative consequences. She believes that these tariffs could introduce mild risks to growth, but adjustments could follow as the year progresses.
Despite these uncertainties, ICRA aims to maintain a GDP growth forecast of 6.5% for FY2026, partially due to anticipated changes in inflation.
Engineering Exports: A Tough Road Ahead
Pankaj Chadha from the Engineering Export Promotion Council of India stressed the significance of the US as a top market for Indian engineering products. In the financial year 2024-25, Indian engineering exports to the US reached $17.27 billion, showcasing an 8.3% increase from the previous year. However, with a proposed 26% tariff looming, Chadha predicts a potential drop in exports by $4-5 billion in the first year, depending heavily on how well the US market adapts to these new duties.
Chadha emphasized the necessity for Indian exporters to look beyond the US, diversifying their markets to cushion any potential fallout from American tariffs. As India and the US negotiate a bilateral trade agreement, there is hope for a reversal or reduction of the 26% tariff.
The Broader Trade Landscape
The ongoing US-China trade war adds another layer of complexity. With both countries imposing high tariffs on each other, India needs to be careful not to get caught in the crossfire. Ajay Srivastava from the Global Trade Research Initiative noted that as the US faces a possible surplus of agricultural products due to reduced exports to China, India’s decisions regarding tariffs and imports could have significant implications.
For instance, India’s strict regulations on ethanol imports have drawn attention. If India considers easing these restrictions, it could foster goodwill with the US but risk upsetting China. This delicate balance requires a strategic approach to maintain India’s interests.
Conclusion
As India navigates the new tariff landscape, the focus should remain on fostering exports, diversifying markets, and maintaining strategic neutrality in international trade disputes. With a careful approach, India could turn challenges into opportunities for growth in the global market.
For further information on trade updates, you can visit the U.S. Trade Representative website.
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Source linkBUSINESSMEN, GLOBAL MARKET, EXPORTS, BILATERAL TRADE, RECIPROCAL TARRIF, COULD BE CHALLENGING TO SELL EXPORTED GOODS IN INDIAN MARKETS: FIEO'S AJAY SAHAI
