Aakhir Tak – In Shorts
- President Donald Trump’s 26% US tariffs on India became effective on Wednesday.
- The stock market opened lower amid rising concerns of a global trade war.
- India’s Union Cabinet will hold a crucial meeting today due to market falls.
- The government aims to strategize ways to minimize the impact of these US tariffs on India.
- Good news: Semiconductors, copper, and pharmaceuticals are exempt from these US tariffs.
Aakhir Tak – In Depth
Trump’s 26% US Tariffs on India Take Effect; Cabinet Eyes Damage Control
The 26% US tariffs on India, announced by US President Donald Trump, came into effect on Wednesday. This move immediately hammered the Indian stock market. Markets opened in the red zone. Concerns about a potential global trade war intensified significantly. Markets have been in a free fall since Trump’s announcement of reciprocal tariffs last week. To address this challenging situation, the Union Cabinet is scheduled to hold a crucial meeting today.
Cabinet Meeting Agenda
According to sources, the primary agenda for the Cabinet meeting is to devise strategies. They aim to minimise the adverse impact of these new US tariffs. The government is treating this matter with urgency. They are assessing the potential damage to Indian exports. Officials are reportedly in touch with exporters. The goal is to provide support and cushion the blow. They want to keep the impact minimal.
Government’s Cautious Approach
So far, the Indian government has adopted a cautious stance. Sources indicate that India is unlikely to impose immediate counter-tariffs on the US. The government wants to avoid escalating the conflict. Instead, the focus is firmly on finalizing the US-India Bilateral Trade Agreement (BTA). This agreement was announced during Prime Minister Narendra Modi’s visit to the US earlier this year.
Hope from BTA and US Order Clause
In March, both nations agreed on the terms of reference for the BTA. The government is keen to expedite this agreement. An official informed Reuters that the government is banking on a specific clause. This clause exists within the US executive order imposing the tariffs. It offers respite to countries that take “significant steps to remedy non-reciprocal trade arrangements”. The Indian government hopes its actions qualify for this relief. This could mitigate the impact of the US tariffs on India.
Trump’s Rationale and India’s Responses
At the heart of Donald Trump’s move is his argument against perceived unfair trade practices. He contends that countries like India impose unfair levies on US exports. Meanwhile, they enjoy preferential access to the vast American market. Trump has repeatedly labeled India a “big abuser” of trade ties. However, India has made efforts to appease the Trump administration. India lowered tariffs on US bourbon whisky and Harley-Davidson motorcycles. It also dropped a tax on digital services, known as the ‘Google Tax’, which affected US tech giants.
Exemptions and Affected Sectors
On a positive note, certain key sectors have been exempted from these US tariffs. These include semiconductors, copper, and pharmaceuticals. This exemption is significant, especially as India supplies nearly half of all generic medicines in the US. However, exports in key sectors like auto parts, gems, and jewellery are expected to take a hit. These sectors are critical for Indian exports. The government is paying close attention to these industries.
Comparative Impact and Potential Opportunities
Experts suggest that the sweeping tariffs announced by Trump might affect rival exporters more severely. India’s Asian peers, such as China (34%), Vietnam (46%), and Indonesia (32%), face higher tariff rates. This situation could potentially create new opportunities for India in certain sectors. The government is also exploring ways to capitalize on these potential openings. Despite the challenge posed by the US tariffs on India, strategic opportunities are being sought.
Aakhir Tak – Key Takeaways to Remember
- The 26% US tariffs on India became effective Wednesday, impacting the stock market.
- The Union Cabinet meets today to strategize on minimizing the tariff impact.
- Exemptions exist for pharma, copper, semiconductors; auto parts, gems face challenges.
- India avoids immediate reciprocal tariffs, focusing instead on the BTA.
- Higher tariffs on competitors might create new trade opportunities for Indian Exports.
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