A worldwide commerce and tariff conflict appears to be within the offing however for now, India is preserving its playing cards near its chest. Officers have identified that India has already minimize import duties on a number of objects as a part of the rationalisation within the Union Price range 2025-26 and is awaiting to see the influence of this. In response to sources, India could also be prepared to chop tariffs on extra imports from the US, however for now, hopes are pinned on Prime Minister Narendra Modi’s assembly with US President Donald Trump throughout his two-day go to to Washington from February 12, 2025.
Trump has introduced that the US will hike the import obligation on aluminum and metal to 25% from 10% with impact from March 4, which may have a direct influence on nations like India.
This can be a repeat of the tariffs he imposed in March 2018 throughout his first time period as US President. The eliminated tariffs on metal and aluminium imports from India on July 3, 2023 as a part of a broader commerce decision introduced throughout Prime Minister Narendra Modi’s go to to Washington.
A report by World Commerce Analysis Initiative identified that the return of tariffs on metal and aluminum might be used as leverage in commerce negotiations. “The 2018 tariffs have been extensively seen as an aggressive technique to power buying and selling companions into concessions. The newest transfer, if applied, may result in new commerce disputes and retaliatory measures from affected nations,” mentioned the report.
Nonetheless, a Nomura report famous that rising Asian economies together with India, Thailand and China have larger relative tariff charges on US exports and are thus susceptible to larger reciprocal tariffs. As per the report, India has a 9.5% weighted common efficient tariff on US exports to India versus a 3% tariff fee on India’s exports to the US.
“We count on Asian economies to step up their negotiations with Trump. India is contemplating decreasing tariffs on over 30 objects together with luxurious automobiles, photo voltaic cells and chemical substances and getting ready to extend purchases of US protection and power,” mentioned the report.
The US accounts for practically 18% of India’s whole exports ( or about 2.2% of GDP, as of FY24) and is India’s largest export vacation spot, with the India-US commerce surplus rising lately to a excessive of about $ 38 billion in 2024. Key exports embody electrical/industrial equipment, gems and jewelry, prescribed drugs, fuels, iron & metal, textiles, automobiles, attire, and chemical substances, amongst others, of which iron & metal and aluminium account for practically 5.5% of the whole, mentioned the report.
Nonetheless, in a post-budget interview with BT, Finance and Income Secretary Tuhin Kanta Pandey famous that India’s tariffs on US imports haven’t been very excessive. “On the 13 giant merchandise from the US, you’d see the necessary merchandise imported from the US on industrial items, our tariffs are inside 10%,” he mentioned, including that with the Price range train, it has been introduced down additional.
India’s efficient tariff fee is now right down to 10.6%, which is near the ASEAN stage, he famous. It was initially 13%, after which introduced right down to 11.6% within the final Price range.
The Union Price range 2025-26 has eliminated seven tariff charges for customs duties, leaving solely eight charges now, together with the zero fee, and has rationalised charges on a number of objects.
