The 37% reciprocal tariff imposed by US President Donald Trump could be impacting India's exports, hitting multiple industries, a top Indian trade and tariff expert has said.
``It will be instructive to remember that 10% of the tariff imposition becomes effective from April 5 while 27% becomes applicable from April 9,” Biswajit Dhar, Professor and Head of the Centre for WTO Studies at the Indian Institute of Foreign Trade, said.
The most impacted sectors on account of the US decision would be gems and jewellery, electronics and clothes, he said. "While Indian domestic sectors are protected from first-level effects, Indian textiles, electronics, and gems & jewellery exporters will be immediately impacted, as exporters will bear the brunt of the increased costs,” he told this reporter.
Could these impositions act as a catalyst for a manufacturing boom, as some experts seem to predict? According to Dhar, that's easier said than done. He said that countries like Malaysia and Indonesia are possibly better positioned than India.
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"We may regain some lost ground in garments now that Bangladesh faces higher tariffs, but the reality is we've treated garments as a sunset sector and failed to invest. Without building capacity, how can we truly benefit from these tariff shifts?"
{{/usCountry}}"We may regain some lost ground in garments now that Bangladesh faces higher tariffs, but the reality is we've treated garments as a sunset sector and failed to invest. Without building capacity, how can we truly benefit from these tariff shifts?"
{{/usCountry}}Even though agriculture will not be seriously impacted because India’s agriculture exports to the US are not substantial, the lack of investment even in this sector shows. "In a way, the US President is holding up a mirror to us. We've done little to invest in agriculture's productive capacity. For now, buying time is the best strategy - maybe offering the US cheaper imports of industrial goods as a trade-off."
In Dhar’s view, India's agricultural challenges aren't just external. Much of the sector's struggles are "its own doing". Smallholder farmers, owning over 85% of holdings, lack investment capacity, while the private sector shows little interest. Farming receives less than 6% of India's total government and private infrastructure investment, leaving irrigation and storage facilities underfunded.
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So, what are India’s best choices at the moment? India will have to "play hardball. Basically, tell the US - we're open to negotiations on other fronts,” Dhar points out.
Since February this year, India has ramped up efforts to win Trump's favour - pledging $25bn in US energy imports, courting Washington as a top defence supplier and exploring F-35 fighter deals. To ease trade tensions, New Delhi scrapped the 6% digital ad tax, cut bourbon whiskey tariffs to 100% from 150% and slashed duties on luxury cars and solar cells.
Even as Elon Musk's Starlink nears final approval, the two countries have launched extensive trade talks to narrow the US's $45bn trade deficit with India.
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As Trump’s announcement during his ‘Liberation Day’ address revealed, none of it has been able to impress the US, as India braces up to assess its potential damage in the days ahead. What will be keenly watched is how it tackles its trade troubles with a strong political ally.