 "Trump's 25% tariffs: 'Unfortunate', say experts, hope trade deal works out")
United States (US) President Donald Trump on Wednesday announced a 25 per cent tariff on goods imported from India, effective August 1. He also warned of unspecified penalties for India’s purchases of Russian military equipment and oil.
The announcement came even as both countries continued negotiations on a trade agreement that has been under discussion for several months.
Reacting to the decision, Madhavi Arora, chief economist at Emkay Global, told Reuters that although the negotiations appeared to have stalled, discussions over a bilateral trade deal were likely not finished.
"We see it more from the lens of geopolitics than purely economics and see both sides striving to get the deal done, even as the power equations may change a bit in the US' favour," Arora said.
Soon after the announcement, White House economic adviser Kevin Hassett said Trump was frustrated with the lack of progress and believed the tariff would aid negotiations.
"I think President Trump is frustrated with the progress we've made with India but feels that a 25 per cent tariff will address and remedy the situation in a way that's good for the American people," Hassett said, according to Reuters.
Unfortunate tariff move, but trade deal hopes remain alive
Industry experts noted that while the tariff posed significant challenges for Indian exporters, there remained cautious optimism that a trade agreement could be finalised soon.
Ranen Banerjee, partner at Economic Advisory, PwC India, said higher tariffs on Indian goods, compared to competing countries, would be difficult to absorb. “However, the expectation is that the trade deal is likely to be finalised shortly and hence the period of applicability of these higher tariffs could be short,” he added.
Highlighting the growing strategic partnership between India and the US, Agneshwar Sen, trade policy leader at EY India, described the move as “an unfortunate development.” However, he also said that both countries remained positively engaged in negotiations, with the US team expected in India later in August to finalise a comprehensive trade agreement.
Nilesh Shah, managing director at Kotak Mahindra AMC, said markets had anticipated a resolution on tariffs, given the alignment of long-term strategic interests between India and the US.
“Markets will hope for a ‘TACO (Trump Always Chickens Out)’ trade if better senses prevail,” Shah told Reuters.
He also pointed to continued trade activity between other countries and sanctioned nations. “China is defying US/UN sanctions on Iran oil, Myanmar and Russia trade, and North Korea support,” he said.
Shah stressed that India's size and competitiveness remain its best defence. “Our biggest deterrence continues to be GDP size and competitiveness.” He expressed hope that the tariff imposition would prompt Indian policymakers to adopt a more growth-oriented approach.
(With inputs from Reuters)