It is a soft-man moment for India, which hoped for a stay of the United States reciprocal prices due to the negotiations in progress for a bilateral trade agreement (BTA). However, US President Donald Trump announced a reciprocal “reduced price” rate on India by 27%, which will start from April 9.
A more in-depth examination of the reciprocal tariff system formulated by the United States shows that India should obtain a competitive advantage compared to China and Vietnam which have been slapped with much higher prices of 34% and 46%, respectively. Likewise, the United States also plans to take a rate of 37% from Bangladesh and 36% in Thailand. The United States will not take any tariffs on certain essential and strategic articles such as pharmaceuticals, semiconductors, copper and energy products such as oil, gas, coal and LNG. Imports of steel, aluminum and auto goods from India in the United States will face a rate of 25%.
Indian government officials who closely monitored American announcements until Wednesday are now heard to examine the impact of these policies. Although Indian exports to the United States can obtain a competitive advantage and could help India increase its long-term manufacturing capacities, concerns abound concerning economic growth prospects as well as short-term growth exports.
Sources have stressed that the way the prices will be applied remain a crucial problem to understand and this would ultimately have an impact on the global prospects of India. The concerns also emerge on a recession led by trade in the American economy which could strike the world economy.
In accordance with an analysis by Emkay Global Financial Services, India exports to the United States could fall from $ 30 to 33 billion or 0.8-0.9% of GDP to 26% of prices, without adapting to the blows or responses of cross-country.
A macquarie report pointed out that there is a downward risk for the projection of GDP of 6.7% per RBI for 2025-2026 against 6.5% in 2024-25 due to commercial wars. “Note that the pharmacy, semiconductors and certain other sectors are exempt from now on and with BTA which should be signed with us in a later part of the year, we must see what the possible implications of GDP are,” he said.
VK Vijayakumar, chief investment strategist, Geojit Investments, stressed that the greatest concern is that this will trigger the price reprisals from other countries, which will result in a complete trade war, having an impact on world trade and global growth. “Bigger inflation in the United States will put the Fed in a close situation; it would be difficult for the Fed to provide the rate reductions expected by the market in 2025. The probability of an American recession by the end of 2025 has increased. This is bad news for the world economy and the markets,” he said.
The United States is the largest trading partner in India and the largest export market. According to data from the Ministry of Commerce, India’s share in imports from the United States increased from 0.9% in 2001 to 2.8% in 2023. During the same period, India imports in the United States increased by a TCAC by 10.48% compared to an increase of 4.76% of imports from the rest of the world in the United States.
A GTRI report pointed out that the imposition of higher reciprocal prices by the United States on several Asian countries, including China, Vietnam, Taiwan, Thailand and Bangladesh, offers India the opportunity to strengthen its position in world trade and manufacturing. “However, gains will not accumulate automatically. India needs deep reforms to allow production to scale, interior value and improvement in competitiveness to benefit,” he noted.
India could win in sectors such as Vis-Un Bangladesh clothing and textiles as well as in electronic telecommunications, and the sectors of smartphones, countries like Vietnam and Thailand are likely to lose the competitiveness of costs due to high American tariffs.
