In a significant setback to bilateral trade, fresh U.S. tariffs on Indian exports came into effect on Wednesday, increasing the aggregate import duty to 50% on an assortment of goods. The action, taken by the U.S. Department of Homeland Security, imposes a further 25% tariff on top of an already existing one, a move attributed to India’s continued import of Russian oil. The development is likely to have a hard-hitting effect on Indian labor-intensive industries and exporters, compromising India’s export-led growth.
Sectors Of Concern To See Major Headwinds
About 66% of India’s exports to the U.S. worth more than $60 billion are now going to be affected by the higher duties, according to the Global Trade Research Initiative (GTRI), a Delhi-based think tank. Textiles, gems and jewelry, leather products, food, and automobiles are the industries likely to be impacted the most. The new tariffs are said to render Indian goods uncompetitive in the U.S. market, and they could also result in job losses and the deceleration of economic growth.
Exporters are already experiencing a slowdown in trade. “This is an absolute shock,” Puran Dawar, a leather shoe exporter from Agra, whose customers include big retailers like Zara, expressed. He cautioned that the sector would take a huge blow unless domestic demand picks up or new foreign markets can be accessed.
India Vows To Resist Pressure And Counter Tariffs
In reaction to the U.S. move, the Indian government has unveiled a multi-faceted plan to soften the impact. Prime Minister Narendra Modi has pledged not to succumb to American pressure, asserting that his government will safeguard the interests of Indian farmers, small enterprises, and the dairy industry. He characterised the situation as a “politics of economic selfishness” and asserted India’s freedom to follow its own national agenda, including the procurement of Russian oil.
The Indian government is also considering domestic policy measures to counter the effects of the tariffs. It is in discussion to cut the goods and services tax (GST) on different products in order to increase domestic consumption. The finance and trade ministries are also preparing financial incentives for the exporters, including better bank loan rates and incentives for diversifying exports to new regions in Latin America, Africa, and Southeast Asia. The postponement of a U.S. delegation visit for a sixth round of trade talks signals a serious blow to diplomatic efforts to resolve the dispute.
