How the US Tariff War Could Present Opportunities for India

The escalating trade war under US President Donald Trump has introduced a wave of economic uncertainty across global markets. However, a recent report suggests that this turmoil may open doors for India by improving its market access in the US. With the US imposing steep tariffs on agricultural imports, India, which is currently negotiating a trade agreement with the US, could use this scenario to its advantage.

US Tariff Increases and Global Retaliation

Trump has confirmed a 25% tariff on imports from Canada and Mexico while doubling tariffs on Chinese goods to 20%. These measures have triggered retaliatory actions. According to the report, Canada has responded with duties of up to 25% on $127.7 billion worth of US goods, while China has introduced additional tariffs on American agricultural products, including chicken, wheat, corn, cotton, soybeans, pork, and dairy.

Impact on Indian Exports

Despite concerns over global supply chain disruptions, the report suggests that the US tariff hikes are unlikely to have a severe impact on India’s agricultural exports. As per the report, India exports coffee, tea, and other beverages worth approximately $390 million annually to the US. Additionally, shrimp and fish exports from India to the US amount to around $2 billion. While a blanket 100% tariff on all US agricultural imports would be a challenge, the report indicates that the current tariff scenario does not pose a significant threat to India’s export volumes.

India’s Potential Market Advantage

With India and the US actively negotiating a trade deal, there exists a possibility for India to secure better market access. The report highlights that if competing exporters, such as China, face high tariffs while Indian exports receive favourable concessions under a free trade agreement, India could gain a competitive edge in the American market. This would provide Indian exporters with a stronger foothold, especially in agricultural and seafood exports.

Long-Term Uncertainty and Risks

While the short-term outlook appears promising for India, the report cautions that the long-term consequences of the trade war remain unpredictable. Disruptions in global supply chains and retaliatory tariff measures from affected nations could introduce unforeseen challenges. Additionally, the report warns that President Trump’s aggressive tariff policies are unlikely to ease, despite the short-term economic costs. His address to the joint houses of Congress on Wednesday is expected to present these tariffs as beneficial to the US economy in the long run.

Conclusion

The US tariff war is reshaping international trade relationships, and India finds itself in a position where it could turn challenges into opportunities. While the report acknowledges risks associated with supply chain disruptions, it also emphasises the possibility of India securing stronger market access in the US through ongoing trade negotiations. However, the evolving nature of global trade policies means that India must navigate this shifting landscape with caution.

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