INDIA’S PREPAREDNESS FOR TRUM TARIFF - ECONOMY

INDIA’S PREPAREDNESS FOR TRUM TARIFF - ECONOMY

NEWS: With Trump now President-elect, India is anticipating a return to protectionist policies, including reciprocal tariffs.

 

WHAT’S IN THE NEWS?

During his first term as U.S. President (2017–2021), Donald Trump criticized India for its trade policies, labeling it a “tariff king.” He imposed penal duties on Indian steel and aluminum exports, prompting India to retaliate by increasing tariffs on prominent U.S. goods such as apples, almonds, chickpeas, lentils, and walnuts.

India’s Preparedness for Trump’s Potential Second Term

The Indian government is devising an informal strategy to manage potential tariff demands or actions that might harm its export economy.

Key Actions and Strategies Being Developed

  1. Analysis of Past Actions and Campaign Promises
    • The Indian Commerce Ministry is closely examining Trump’s trade policies from his previous term.
    • Particular attention is being paid to his campaign speeches, where he criticized India for high tariffs and hinted at reciprocal tariffs of 10% on all countries and 60% tariffs on China.
  2. Identifying Low-Sensitivity Tariffs
    • Efforts are underway to identify tariff lines that could be reduced without significantly impacting India’s economic interests.
    • The focus is on items where tariffs are primarily for revenue generation rather than protecting domestic industries.

Reciprocal Tariff Concerns

  • Trump’s “big abuser” rhetoric resurfaced during his recent campaign, where he accused India of unfair trade practices.
  • He emphasized the need for reciprocal tariffs, signaling possible trade tensions if similar measures are reintroduced.

Current U.S.-India Trade Snapshot

  • The U.S. remains India’s largest trading partner, with:
    • Exports from India to the U.S. totaling $77.51 billion in FY24.
    • Imports from the U.S. amounting to $42.19 billion in the same period.

 

Resolution During the Biden Administration

  • After Trump’s first term, trade tensions between the U.S. and India eased under President Biden.
  • Both countries reached an agreement, resolving disputes over retaliatory tariffs and moving towards normalized trade relations.

Challenges Ahead

  • Trump’s unpredictability in trade policy is a key concern for India, as he could impose abrupt tariff measures.
  • India aims to be proactive by preparing countermeasures and identifying potential compromises to avoid major trade disruptions.

Trump’s Warning to BRICS Nations

  1. Commitment Against New Currency Creation
    • Trump demanded a formal commitment from BRICS nations to abstain from launching a BRICS currency or backing any alternative to replace the U.S. dollar.
    • Failure to comply could result in a 100% tariff on exports from these countries to the U.S.
  2. Tariff Threats
    • Trump reiterated his pledge to impose severe tariffs on countries moving away from the U.S. dollar in bilateral or international trade.
    • This aligns with his broader campaign narrative of making de-dollarization efforts economically costly for participants.

Potential Punitive Measures

Trump’s economic team is exploring various measures to deter countries from reducing their dependence on the dollar, including:

  • Export Controls
    • Restricting the export of sensitive U.S. goods and technologies.
  • Currency Manipulation Charges
    • Accusing nations of artificially undervaluing their currencies to gain trade advantages.
  • Additional Levies on Trade
    • Imposing tariffs or duties on imports from countries engaging in non-dollar trade.

 

Concerns Over De-Dollarization

  1. BRICS’ Push for De-Dollarization
    • The BRICS bloc has been vocal about its intentions to explore alternatives to the dollar for international trade.
    • Discussions on de-dollarization gained momentum during the 2023 BRICS summit.
    • The movement was further bolstered by U.S.-led sanctions on Russia in 2022, which highlighted vulnerabilities for countries dependent on the dollar.
  2. Trump’s Reaction
    • Trump’s statements reflect a strong protectionist stance, aiming to reinforce the dominance of the U.S. dollar in global trade and finance.
    • His campaign to prevent de-dollarization is rooted in safeguarding U.S. economic interests.

Conclusion

India is bracing for a potentially volatile trade relationship with the U.S. under Trump’s second term. By analyzing his past actions and rhetoric, the government hopes to craft strategies that protect its export interests while minimizing potential retaliatory measures.