India’s Tariffs Driven by Low Per Capita Income, Not Protectionism

India is exploring a multi-sector bilateral trade agreement with the United States amidst growing global trade tensions. The move comes as the US, under former President Donald Trump’s leadership, sought to impose reciprocal tariffs, citing trade imbalances.

According to reports, India’s tariff structure is shaped by its lower per capita income relative to developed nations, existing manufacturing capabilities, and competitive pressures from neighbouring economies with surplus export capacity.

US Trade Actions: Addressing Deficits and Fairness Concerns

Reports indicate that the US has been taking measures to address its trade deficit, citing unfair trade practices and the need to revitalise domestic industries. By imposing tariffs, the US aims to make foreign goods costlier, thus incentivising local production. However, such actions may also lead to higher prices for American consumers.

The approach has sparked debates about the balance between economic protectionism and consumer affordability, with experts cautioning against potential negative repercussions.

India’s Tariffs: Justified or Trade Barriers?

According to a news report, most of India’s tariffs on American imports are reasonable and necessary to support domestic economic conditions. While critics argue that such measures act as trade barriers, proponents highlight that India’s tariff policies reflect its developmental stage rather than an attempt to restrict global trade.

Trade diversion, a natural market phenomenon, was also addressed, with sources indicating that India shifting crude oil imports from Russia to the US would not be a cause for concern.

Country-Specific Trade Probes and Uncertainty

With the US conducting country-specific investigations into its trade deficits, pinpointing the precise impact of such policies remains challenging. Reports indicate that these investigations could reshape trade dynamics but may not yield clear-cut solutions.

As India and the US navigate their trade relationship, the outcome of negotiations and policy shifts will likely have far-reaching implications for global trade and economic diplomacy.

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