Concerns Rise Over New US Tariff Law Impacting Indian Exports
A recent law in the United States that gives President Donald Trump the power to impose tariffs of up to 100% on Indian goods has raised alarm among various sectors in India, including engineering, energy, pharmaceuticals, and software. Even the budding field of defense exports, where Indian manufacturers support major global players like Boeing and Lockheed Martin, is left questioning the future implications of this decision.
According to data from the Commerce Ministry, India’s merchandise exports to the US reached $87 billion in the previous fiscal year, making up nearly 20% of the country’s total exports. Data from the Reserve Bank of India highlighted that the software exports to the United States are estimated to be around $120 billion this fiscal year.
The full extent of the impact on Indian exports will become clear only after the US government specifies the tariff rates, which products will be affected, and when these changes will take effect. On Friday, Trump also signed a bill aimed at imposing heavy penalties on Russia and its top energy consumers, including India and China.
This significant shift comes just 18 months after President Trump and Indian Prime Minister Narendra Modi discussed boosting trade during Modi’s visit to the White House. They had set an ambitious target to double bilateral trade to $500 billion by 2030.
India’s exports to the US primarily consist of pharmaceuticals, software, refined petroleum products, telecom equipment, and precious stones, among others. In contrast, the country imports crude oil, petroleum products, and machinery from the US.
The president of the Federation of Indian Export Organisations, SC Ralhan, expressed serious concerns, stating that high tariffs could bring Indian exports to a standstill, as importers would struggle to manage the increased costs.
Analysts suggest that this could be a strategy by the Trump administration to exert pressure on nations like India ahead of the US midterm elections. Higher import duties typically increase costs for consumers, and if countries like Bangladesh and Vietnam have lower tariffs, Indian products may struggle in the competitive market.
Mohit Singla, chairman of the Trade Promotion Council of India, echoed these worries, emphasizing that the US’s decision could significantly disrupt business relations between the two countries.
Ajay Srivastava, founder of the Global Trade Research Initiative, warned India against sacrificing its energy needs for short-term tariff relief, suggesting that neither a trade agreement nor ceasing oil purchases from Russia would protect India from future actions under US trade laws.
The unfolding situation poses a critical challenge for Indian exporters as they navigate potential changes in the trade landscape with the US.
