(THE NEWSMAN OF INDIA.COM)
(Reuters) – India said on Thursday it was studying the impact of the 27% tariff slapped by the U.S. on its imports and vowed to push for a trade deal this year, signalling a conciliatory tone despite failing to get relief from President Donald Trump’s trade policy.

New U.S. Tariffs (April 2, 2025):

26% Tariff on Indian Imports: The U.S. imposed a 26% tariff on Indian imports, effective April 2, 2025. This rate is comparatively lower than those imposed on other Asian countries, such as China (34%) and Vietnam (46%).

10% Baseline Tariff on All Imports Globally: A universal 10% tariff applies to all imports, with higher rates for specific countries based on reciprocal measures.

25% Tariff on Automobiles: A 25% tariff has been imposed on all imported automobiles, effective April 2, 2025.

Economic Impact on India:
Minimal GDP Effect: India’s economy, driven primarily by domestic demand, is projected to maintain a growth rate of approximately 6.5%, suggesting limited overall GDP impact from these tariffs.

Exports May Decline: Indian exports to the U.S. are expected to face challenges, with potential declines estimated between $2 billion to $7 billion annually.

Inflation & Fiscal Stability Intact: As of February 2025, India’s inflation rate stood at 3.6%, with a fiscal deficit of 4.8%, indicating stable economic fundamentals.

**Sectoral Impact:**

– **Textiles & Apparel:** With exports valued at $9.5 billion, this sector may experience reduced competitiveness in the U.S. market due to increased tariffs.

Pharmaceuticals: Notably, Indian pharmaceutical exports, amounting to approximately $9 billion annually, have been spared from the new tariffs, preserving their competitive position in the U.S. market.

Gems & Jewelry: Exports worth $8.5 billion could see decreased demand as a result of the tariff hike.

Auto Parts & Chemicals: These industries may encounter reduced demand and potential supply chain disruptions due to the increased tariffs.

Agriculture: Existing high tariffs have already limited U.S. market access for Indian agricultural products; the new tariffs may exacerbate these challenges.

Mitigating Factors:
Diversification: India is actively seeking to strengthen trade relationships with regions such as the Middle East, Europe, and Africa to offset the impact of U.S. tariffs.

Domestic Demand: Initiatives like ‘Make in India’ and rising local consumption are expected to help mitigate the slowdown in exports.

Strategic Impact & Opportunities:

China Hit Harder: With China facing a 34% tariff compared to India’s 26%, India may gain a relative competitive advantage in the U.S. market.

Bilateral Trade Talks: Ongoing negotiations between India and the U.S. aim to address these tariff issues, with potential reductions anticipated.

Long-Term Growth: The current scenario may encourage growth in manufacturing, regional trade, and IT services within India.

Potential Risks & Challenges:

Domestic Industry Pressure: Reducing Indian tariffs on U.S. goods as a reciprocal measure could adversely affect local manufacturers.

Trade War Risks: There’s a possibility of global retaliation from other countries, including China, the EU, and Canada, which could disrupt international supply chains.

Higher U.S. Consumer Prices: Increased tariffs may lead to higher prices for U.S. consumers, potentially reducing demand for Indian exports over time.

In summary, while the new U.S. tariffs present certain challenges for India’s export sectors, the country’s strong domestic demand and strategic initiatives may help mitigate some of the adverse effects. Ongoing diplomatic efforts and trade negotiations will be crucial in navigating this evolving landscape.