US President Donald Trump has increased the tariff rate on India from 25 per cent to 50 per cent, effective from August 27. Reason? India’s continued acquisitions of energy and military assets from Russia. Well, India and Russia’s bilateral relations date back to 1991 and ever since then, they have remained close allies. Then why has the United States taken it up as a cause to double the tariff? We will dive into this geopolitical drama later as we proceed; before that, let’s tackle the burning question of how hard this tariff will hit India’s exports.
Come August 27, India’s exports to the United States won’t just be facing a 25 per cent country-specific tariff. They will rather be a victim to the steep 50 per cent duty. Although Washington has provided with a 21-day grace period, but whether this window will offer India any real breathing room or not completely depends upon the negotiations between Prime Minister Narendra Modi and President Donald Trump. If the leaders from the two leading nations can strike a diplomatic chord and hammer out a deal before the clock runs out, then it could be a pause that India needs. But without a breakthrough at the negotiating table, the countdown may lead straight to a heavier export blow.
How big is the blow?
According to think tank Global Trade Research Initiative (GTRI), India’s exports to the United States may drop nearly 30 per cent this fiscal, falling from USD 86.5 billion to USD 60.6 billion. This impact would leave India among the worst-hit exporters in Asia, second to China, which faces a 30 per cent tariff. In contrast, other Asian countries like Vietnam, Bangladesh, and Malaysia are subject to only 15 per cent to 20 per cent duty.
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