“A major blow to the world economy.”“There seems to be no order in the disorder.”“Not the act of a friend.”These were just some of the reactions from around the world that came in after US President Donald Trump unveiled his steepest tariffs in a century on April 2 from the lawns of the White House. Trump’s ‘Liberation Day’ tariffs include a 10 per cent tariff on all exporters and even more taxes on 60 nations, aimed at addressing what he calls unfair trade imbalances.AdvertisementHours after unveiling his harsh tariffs, Trump said on Truth Social, “The operation is over! The patient lived, and is healing. The prognosis is that the patient will be far stronger, bigger, better, and more resilient than ever before. Make America great again!”More from Explainers
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FirstUp: PM Modi to meet Yunus, Yoon Suk Yeol’s impeachment verdict… The headlines todayUnsurprisingly, Trump’s tariff announcement caused seismic waves in the
markets in the United States, Europe and Asia — with the S&P 500 dropping 4.8 per cent in its biggest loss since 2020, while the tech-rich Nasdaq plummeted 6.0 per cent and the Dow Jones 4.0 per cent.As the dust settles on Trump’s announcement, we take a closer look at just how these tariffs will impact India’s exports. Which sectors will be hurt the most and which may gain?Trump’s 27% tariff on IndiaStarting April 9,
Indian goods will be slapped with a 27 per cent tariff — Trump’s tariff chart listed India’s rate as 26 per cent, but the official order says 27 per cent.Speaking from the White House’s Rose Garden on what he called “Liberation Day”, Trump explained that the new tariffs on New Delhi were “discounted” as he was “great friends” with Prime Minister Narendra Modi. “India, very, very tough. Very, very tough. The prime minister just left. He’s a great friend of mine, but I said, ‘You’re a friend of mine, but you’re not treating us right.’ They charge us 52 per cent. You have to understand, we charge them almost nothing, for years and years and decades,” Trump said.Editor’s Picks126% on India, 34% on China: How did Trump govt calculate tariffs for ‘Liberation Day’?2Inflation, job losses and recession? How Trump tariffs have spooked US and the worldUS President Donald Trump delivers remarks on tariffs in the Rose Garden at the White House in Washington, DC. ReutersIn the Asian continent, Trump’s tariffs on India are relatively low. The US president has slapped even higher tariffs on China —54 per cent, Vietnam — 46 per cent, Thailand — 36 per cent, and Bangladesh — 37 per cent. Interestingly, India’s neighbour, Pakistan has also drawn a reciprocal tariff of 29 per cent.AdvertisementSoon after the announcement, India’s Commerce Ministry said that the administration is analysing the impact of the levies imposed by the US. “The ministry is analysing the impact of the announced tariffs,” the official said, adding there is a provision that if a country would address the concerns of the US, the Trump administration can consider reducing the duties against that nation.“It is a
mixed bag and not a setback for India,” the official added.Other experts also noted that Trump’s 27 per cent tariff would impact some sectors more than others.Pharma — the big gainerIndian pharmaceutical exports have been exempted from US tariffs, making it the biggest winner, sector-wise. India supplies nearly half of all generic medicines in the US, where these lower-cost alternatives account for 90 per cent of prescriptions.And this news was received well at the market. Pharma stocks saw a jump — Lupin Ltd shares rose 4.26 per cent to Rs 2,095, Sun Pharmaceutical Industries Ltd gained 3.26 per cent to Rs 1,770, and Cipla Ltd closed 2.92 per cent higher at Rs 1,495.Apparel hit, but could still see gainsIndia, which exports over $7 billion worth of apparel and textiles to the US, will be hit by Trump’s 27 per cent tariff. Apollo Fashion International explained that the Trump tariff will be a significant challenge, especially for businesses operating on thin margins.“It will impact pricing and demand in the short-term, but the fundamentals of the industry remain strong. India has built a robust supply chain, skilled workforce, and growing capabilities in quality manufacturing,” Apollo Fashion International President Shiraz Askari was quoted by news agency PTI.AdvertisementHowever, most experts note that Trump’s reciprocal tariffs will have a short-term impact on
India’s textile industry and even put India in a favourable position in the long run.A worker checks garments inside a garment factory in Faridabad, India. Experts note that the latest round of tariffs may help Indian exports get more competitive compared to China and Vietnam. File image/ReutersThat’s because other garment-exporting countries like China, Vietnam, and Bangladesh have been slapped with higher tariffs, giving an edge to India. As EY India Partner and Retail Tax Leader Paresh Parekh told news agency PTI it appears “advantage India” for the Indian textile sector.“India competes globally for textile exports with countries like Bangladesh, Vietnam, Cambodia, Sri Lanka, China, Pakistan, etc. Interestingly, as compared to around 27 per cent tariff for Indian imports, these countries have been hit harder by USA tariffs: Bangladesh at 37 per cent, Vietnam at 46 per cent, Cambodia at 49 per cent, Pakistan at 29 per cent, China at 54 per cent, Sri Lanka at 44 per cent, etc,” he said.“This situation poses an opportunity for the Indian textile sector to grab and increase its market share in the US. However, there is a risk as well — if there is a slowdown in consumption in the US due to higher prices, the overall US market itself may shrink.”AdvertisementIT sector unfazedIndia’s IT sector has been shielded from Trump’s tariffs, as they do not apply to service-based exports. This is significant, since IT services contribute substantially to India’s economy, with software services exports reaching $205.2 billion in FY24. The US remains the largest market, accounting for nearly 70 per cent of India’s IT export revenue.However, experts warn that there the sector could see some indirect impact. Jefferies said that there may be indirect impact from slower GDP growth due to higher tariffs.Agricultural exports hitOne sector which will see a huge impact is the agricultural export sector. The US is India’s top market for agricultural goods — in 2024, India exported $5 billion worth of agricultural products, while imports stood at $1.5 billion.Exporters, namely of rice, shrimp and buffalo meat, warn that the 27 per cent tariff would hit them significantly. According to the Global Trade Research Initiative, Shrimp, which is India’s largest seafood export to the US, will struggle against competitor suppliers such as Ecuador, which has been slapped with only a 10 per cent tariff.Shrimp, which is India’s largest seafood export to the US, will struggle to remain competitive after the imposition of Trump’s tariffs. File image/Reuters“The imposition of 26 per cent tariff on Indian exports has come as a huge surprise for us. We were not expecting it,” Pawan Kumar, president, Seafood Exporters Association of India, told Live Mint.“This is not only detrimental to India but also farmers, fisherman and exporters. Currently, Indian exporters are subjected to around seven per cent duty including countervailing duty and anti-dumping duty,” he added. “Once the increase in tariff is in place which is from April 9, (Indian) exporters would be subjected to 33 per cent tariff, which will make us un-competitive in the US market.”AdvertisementHowever, some experts believe that India’s agricultural exports won’t be as severely impacted. That’s because the other countries from where US imports agricultural items have been hit by higher tariffs.Vietnam and Thailand are among India’s main competitors when it comes to farm exports. However, the US has levied duties of 46 per cent on Vietnam and 36 per cent on Thailand. “The way to look (at the reciprocal tariff) is to not just look at our tariff but also what the tariffs are on our competitors for these commodities. For example, if you take rice, our tariff will go up to 26-27 per cent. But then our biggest competitors are Thailand, Vietnam, and Pakistan, and tariffs on those three countries are even higher than ours. So we will have a comparative tariff advantage. And, therefore, even with higher tariffs, we can push for higher exports,” Ashok Gulati, agricultural economist and former chairman, Commission for Agricultural Costs and Prices, told Moneycontrol.AdvertisementGems and jewellery may lose shineThe gems and jewellery sector will be one of the most affected by Trump’s 27 per cent retaliatory tariff. Gems and jewellery made up 12.8 per cent of India’s exports to the US and amounted to $9.9 billion in FY24.Kirit Bhansali, chairman of the Gem and Jewellery Export Promotion Council said that the tariffs have the potential to bring the industry to a standstill as US importers will assess whether to place orders with Indian jewellery exporters.The gems and jewellery sector will be one of the most affected since import tariffs may be up to 20 per cent from the current zero per cent on loose diamonds and 5.5-7 per cent on gold jewellery. File image/ReutersEven former Gujarat regional chairman of the Gem and Jewellery Export Promotion Council (GJEPC), Dinesh Navadiya agreed that the new tariffs would hurt India’s exports to the US. “In 2023-24, India’s gems and jewellery export to the US was $9.95 billion. With an annual sale of $89.54 billion, the US is the world’s biggest market of diamonds and diamond jewellery. The new tariffs will increase the prices of our products in the US and it will eventually affect our exports to that country,” Navadiya said to PTI.From zero per cent tariffs on polished diamonds, the US has now imposed a steep 27 per cent duty. Similarly, duty on gold jewellery has been hiked from the current levels of five to seven per cent to nearly 32 per cent, he said.India in contact with the USMeanwhile, the Modi administration said that it was already in talks with Washington and working on the swift conclusion of a mutually beneficial, multi-sectoral Bilateral Trade Agreement. “We remain in touch with the Trump administration on these issues and expect to make progress in the coming days,” said India’s trade department.Quoting a source, Reuters also reported that New Delhi is considering helping export sectors hurt by the new tariffs.With inputs from agenciesTagsDonald TrumpIndiaTariffEnd of Article
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