India’s Strategic Response to U.S. Tariffs: A Calibrated Approach
India’s response to Trump’s tariffs will be measured, with key sectors like auto components and chemicals severely impacted. Officials assert India’s competitive advantages over other countries, while the stock market reacts cautiously. Future relief may depend on a proposed Bilateral Trade Agreement by 2025, which seeks to boost trade significantly.
India’s response to the recent tariffs imposed by President Trump will be measured and calculated, according to a government official. Preliminary assessments indicate that the auto components, chemicals, shrimp, and steel sectors in India will be significantly affected, while the pharmaceutical sector seems less impacted. It has been reported that India does not plan to impose retaliatory tariffs on U.S. imports.
One official emphasized that India’s approach will contrast with that of some countries that have made threats regarding U.S. imports. Instead, officials view potential advantages, citing India’s competitive position against countries such as China, Bangladesh, and Vietnam in labor-intensive sectors. The Commerce Ministry is currently analyzing the implications of this move.
Despite the tariffs, India may hold advantages in terms of effective tariffs, with estimates suggesting that India has a 54-79% advantage over China and a notable edge in textiles over Vietnam and Bangladesh. The effective tariff against India has been noted at 27%, slightly higher than the initially reported rate of 26%.
The stock market reacted negatively initially, with the BSE Sensex dropping around 806 points before recovering to a lower value at 200.6 points. This represents a decline of 0.26% from the previous day’s close. The calculation of these reciprocal tariffs appears to stem from the U.S. trade deficit with particular countries, leading to reciprocal tariffs that aim for a bilateral trade balance.
India’s prospects of alleviating these tariffs hinge on a forthcoming trade deal. Discussions indicate a proposed Bilateral Trade Agreement (BTA) aimed at increasing bilateral trade from $200 billion to $500 billion by 2025. Officials suggest that given the ongoing engagement between Prime Minister Narendra Modi and President Trump, a hasty reaction to these tariffs is unnecessary.
In summary, India is adopting a careful stance in response to the tariffs imposed by the United States. While several sectors face challenges, including auto components and chemicals, potential competitive advantages exist for India in the labor-intensive markets. The approach aims to maintain stable trade relations as India looks toward a broader trade agreement to address these tariff concerns effectively.
Original Source: www.hindustantimes.com
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