17 April 2025 : The Hindu Editorial Analysis

1. Shaping a response to the U.S.’s reciprocal tariffs

(Source – The Hindu, International Edition – Page No. – 8)

Introduction of New U.S. Tariffs

• The U.S. has introduced new reciprocal tariffs that apply both country-wise and commodity-wise.
• These tariffs include an existing import duty and an additional country-specific tariff for all goods.
• The additional reciprocal tariffs are currently on hold and limited to 10% for 90 days, except for one major country.

Goods Exempted from Additional Tariffs

• Some key goods are exempt from the additional tariff: Steel and aluminum articles, autos and auto parts, copper, pharmaceuticals, semiconductors, lumber, bullion, energy products, and certain critical minerals not available in the U.S.

Impact on Indian Exports

• India’s overall exports to the U.S. are modest and have declined in recent years.
• The additional 26% tariff will have varied effects on different export items.
• Key Indian exports to the U.S. include electrical machinery, gems and jewellery, machinery, mineral fuels, and iron and steel products.
• Pharmaceuticals are currently exempt, and gems and jewellery may not be severely affected due to inelastic demand.
• The most affected items would be electrical machinery, mechanical appliances, and made-up textiles.
• Competing countries like Vietnam, Cambodia, Bangladesh, and China also face high reciprocal tariffs, making India relatively competitive.

India’s Strategic Response

• India imports many essential goods from the U.S., making any retaliatory tariff harmful domestically.
• A smart response could be to increase imports from the U.S. in areas like petroleum, which would reduce India’s reciprocal tariff rate to 11.8%, close to the minimum of 10%.
• This strategy would shift India’s import composition without increasing the current account deficit.

Global Trade Concerns and the Role of WTO

• Aggressive tariff actions by major countries have led to steep tariff hikes in some cases, such as 145% to 245%.
• Such steps cause global trade uncertainty and harm growth prospects.
• There is a need for a fair and transparent world trade system with low tariffs.
• The World Trade Organization should lead efforts to create a stable global trading environment.
• Until then, regional trade agreements should be pursued as temporary alternatives. 

Read more – 16 April 2025 : The Hindu Editorial Analysis