India’s Trade Strategy in Response to Upcoming US Tariffs
On April 2, new US tariffs targeting countries, including India, are expected. India is formulating a response led by Minister Piyush Goyal, as discussions for a Bilateral Trade Agreement advance. India aims to reach a $500 billion trade target with the US by 2030 but faces challenges due to existing tariff disparities and potential non-tariff barriers. Stakeholder consultations are ongoing to assess impacts and propose reciprocal tariff reductions.
On April 2, the United States is expected to implement new tariffs targeting various countries, including India. This development follows a statement by President Donald Trump, who emphasized the disparity in tariffs imposed by other nations compared to those imposed by the US. India has less than a month to strategize its response as Minister of Commerce and Industry Piyush Goyal prepares to visit Washington to engage in discussions aimed at resolving pressing trade issues and advancing a proposed Bilateral Trade Agreement.
In February, both nations agreed to aim for a comprehensive trade deal by the end of the year, setting a target of increasing trade to $500 billion annually by 2030. Amid Trump’s comments, which highlighted high tariffs imposed by countries like India, commerce officials in India are hopeful of navigating challenges arising from potential US tariff hikes. Concurrently, they have initiated stakeholder consultations to evaluate the implications of such tariffs and explored reciprocal measures such as reducing import levies in key sectors.
India is considering proposals to eliminate tariffs on most industrial goods imported from the US, contingent on similar reductions from Washington. Notably, agriculture may be excluded from these negotiations. Ajay Srivastava from the Global Trade Research Initiative suggested presenting this proposal to the US before any tariff decisions are finalized. India may also seek to notify any resulting agreement as a goods-only trade deal through the World Trade Organization (WTO).
Currently, many US products face hefty tariffs in India, including motorcycles and various food items. While India’s average tariff on American goods stands at 7.7%, contrasting sharply with the lower 2.8% on Indian exports to the US, certain sectors face more significant disparities. Trade experts indicate that the US is likely to push for reduced tariffs on these products, which could significantly influence India’s export landscape.
India, being the largest trading partner of the US, saw exports totaling $77.51 billion in FY24 against imports of $42.2 billion. However, experts express concern that the US may impose non-tariff barriers and local taxes, further complicating the trade relationship and potentially impacting India’s export competitiveness in critical sectors.
In summary, with the impending US tariff changes, India faces a critical period for its trade strategy, requiring swift negotiations and potential policy adjustments. The proposed bilateral trade agreement and stakeholder consultations are essential steps towards addressing tariff disparities and protecting key export sectors. However, the complexities of non-tariff measures and sector-specific vulnerabilities present significant challenges for India as it navigates this evolving trade landscape.
Original Source: m.economictimes.com
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