UPSC CURRENT AFFAIRS – 04th April 2025

Home UPSC Current Affairs India’s exports to US hit with 27% tariff, Asian rivals face higher tariffs; US markets in turmoil

India’s exports to US hit with 27% tariff, Asian rivals face higher tariffs; US markets in turmoil

Why in News?

The US has imposed reciprocal tariffs, setting India’s rate at 27%, impacting exports while creating opportunities in textiles and manufacturing.

Introduction

US President Donald Trump has imposed new reciprocal tariffs, setting India’s tariff rate at 27%, impacting key export sectors like gems & jewellery and auto components.
The move is part of a broader trade policy aimed at reducing the US trade deficit and countering trade barriers imposed by other nations.

Key Highlights of the Tariff Policy

General Tariff Increase: A blanket 10% tariff has been imposed on all countries.
Higher Tariffs for Trade-Deficit Countries: Countries with high trade deficits with the US face higher individual tariffs.
Impact on China and Other Nations:
- China: 54% effective tariff (including previous duties).
- Other Asian countries: Thailand (36%), Indonesia (32%), Laos (48%).
- India: 27% tariff, lower than China but higher than Japan (24%) and South Korea (25%).

Implications for India

Impact on Indian Exports
- Sectors Affected: Gems & jewellery, auto components, chemicals, and telecom products.
- Higher costs for US buyers may reduce demand for Indian goods.
Potential Opportunities
- Textile & Garment Exports: Higher US tariffs on China (54%) and Bangladesh (37%) create a market for Indian textiles.
- Manufacturing Shift: Companies may consider relocating to India as an alternative to China.
Trade Negotiations and Market Dynamics
- India had signaled tariff reductions in ongoing trade talks, but US tariffs were still imposed.
- The US cited India’s non-tariff barriers (testing & certification rules) as trade restrictions.
India’s Competitive Advantage
- India’s tariff rate (27%) is lower than many Asian competitors, making Indian goods more attractive compared to high-tariff nations like Vietnam (46%) and Thailand (36%).
- Potential for India to strengthen its position in global supply chains.

US Perspective on India's Trade Policy

The US Trade Representative (USTR) report flagged India’s high tariffs on agricultural and industrial goods.
India’s flexible tariff structure creates uncertainty for US exporters.
US concerns include India’s agricultural subsidies and GM-free certification rules.

Conclusion

The US tariff hike poses challenges and opportunities for India. While it may impact key export sectors, it also presents an opportunity for India to expand its role in global trade and attract investments in sectors like textiles and manufacturing. The future trajectory will depend on India-US trade negotiations and India’s ability to capitalize on shifting global supply chains.