India has already acted to address key U.S. concerns by increasing its planned purchases of U.S. energy resources from $15 billion to $25 billion. It is also considering reducing tariffs in the electronics, medical equipment, and chemicals industries to increase U.S. exports.
Holding fast to his position, U.S. President Donald Trump repeated on Monday that a 25% tariff on imports from Mexico and Canada would go into effect on Tuesday, disappointing investor expectations of a last-minute deal to avoid full tariffs on these U.S. allies.
Along with slapping tariffs on the two border countries, Trump also imposed an additional 10% duty on Chinese imports, doubling the 10% tariff imposed on Beijing earlier in February.
Trump previously levied—and then temporarily suspended—broad tariffs on Canadian and Mexican imports in February, blaming them for not doing enough to prevent illegal immigration and drugs entering the US. With the suspension set to lapse on Tuesday, confirmation of the duties has triggered a sell-off in global markets.
Recent estimates put the tariffs affecting over $918 billion in U.S. imports from Canada and Mexico. Trump has already imposed a 25% tariff on all U.S. steel and aluminum imports, along with tariffs on Chinese goods, since taking office for a second nonconsecutive term.
Additionally, he placed tariffs on pharmaceutical, semiconductor, and automobile imports and threatened a 25% tariff on imports from the European Union.
His administration is also readying retaliatory tariffs against any country that imposes duties on American goods or restricts American market access with non-tariff barriers. An official announcement could be made as soon as April 2, sources say.
U.S. markets had initially reacted positively to Trump's tariffs, expecting they would benefit U.S. industries. Fears of retaliatory actions by targeted nations have since weighed on markets, raising concerns about economic damage and inflationary effects.
Will India Face U.S. Tariffs Next?
On Monday, Trump gave warning to U.S. farmers to get ready for upcoming tariffs on imported items.
“To the Great Farmers of the United States: Get ready to make a lot of agricultural products to be sold WITHIN the United States. Tariffs on imported goods will start April 2nd. Enjoy!”
Trump posted on his personal social media website as trade tensions escalated.
Media reports say the U.S. is pressuring India to cut tariffs on agricultural products, but India is resisting, arguing that this would harm millions of impoverished farmers.
Amid these developments, India's Trade Minister Piyush Goyal traveled to the U.S. on Monday for trade discussions, just weeks before Trump's planned reciprocal tariffs. Two government officials told Reuters that Goyal's trip is aimed at seeking clarification on these planned tariffs and examining their implications for India.
Goyal is expected to explore possible Indian concessions and negotiate a trade agreement to reduce tariffs and expand bilateral trade during the visit. While India is ready to reduce tariffs on industrial goods such as automobiles and chemicals, it is firm about not reducing tariffs on farm products, citing concerns about small and marginal farmers.
In April, when Prime Minister Narendra Modi visited the U.S., the two nations agreed to aim for the first phase of a trade deal by the fall of 2025, with a long-term goal of achieving bilateral trade of $500 billion by 2030.
India has already acted to respond to U.S. concerns on a number of fronts, including increasing energy imports and considering tariff reductions in certain sectors. Further, the Indian government is reportedly preparing a new electric vehicle (EV) policy to attract global manufacturers like Tesla and is considering tax reductions on certain U.S. goods.
Potential Impact of U.S. Tariffs on Indian Industries
If Trump is not satisfied with India's efforts on trade, he can slap the same tariffs that have been imposed on Mexico and Canada. Those tariffs, analysts warn, could hurt large Indian exports such as petrochemicals and pharmaceuticals that comprise nearly 20% of India's exports to the U.S.
Those tariffs would also generate headwinds for Indian economic growth, weakening Asia’s third-largest economy. India was the 10th largest exporter to the U.S. in 2024, and its bilateral goods trade surplus has doubled over the past 10 years to $35 billion in FY24—about 1.0% of India’s GDP.
However, S&P Global Ratings states that the impact of retaliatory tariffs by the U.S. on India may be subdued as India's economy is less export-led and more domestic demand-driven.
Goldman Sachs discusses three significant manners in which U.S. reciprocal tariff policy can affect India: firstly, through country-level reciprocity; secondly, through product-level reciprocity; and thirdly, through non-tariff barriers.
Economists Warn of Economic Consequences for U.S.
In response to the U.S. tariffs, the affected countries have declared their measures of retaliation. China has announced additional tariffs of up to 15% on certain U.S. goods from March 10 and has restricted exports to 15 U.S. firms. Similarly, Canada announced C$125 billion worth of new retaliatory tariffs on U.S. imports within 21 days, beginning with a 25% tariff on C$30 billion worth of goods from Tuesday.
Economists have cautioned that those counter-measures would harm the U.S. economy. Higher tariffs on imports could lead to elevated local prices, reducing consumer demand and damaging exports.
U.S. consumers are already expressing concern over potential price hikes, and this has prompted a reduction in discretionary spending. The personal savings rate has also surged. Personal income rose sharply in January by 0.9%—twice more than the expected 0.4% increase, according to figures from the Personal Consumption Expenditures (PCE) report.
Yet, this rise in income did not translate into higher spending, which dropped 0.2%, contrary to the expected 0.1% rise. Recent U.S. manufacturing and construction industries data for the month of January indicated modest growth only, reflecting the uncertain economic climate.
As trade tensions escalate, the global economic impact remains unclear, with policymakers and business leaders closely monitoring events.
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Source: livemint.com
