The American Tariffs and its implications on India

The global economy can be seen as a ripple effect, where the decision of one country can affect other countries. Recently, something happened that can have a massive effect on the world economy. The United States of America, a key player in the world trade imposed tariffs on basically the entirety of this world and India finds itself as one of the countries in the receiving end of these fiscal tariffs.

Before discussing this issue, it is important to know what tariffs are and why they are implemented. In simple words, tariffs are the taxes that governments place on imported goods, making them more expensive. They are implemented to help local businesses compete and generate revenue.

On India, the US imposed 27% reciprocal tariffs on Indian imports. While most goods face 27% tariffs, some goods like automobiles, steel and aluminum faced tariffs of 25%, while others can face tariffs up to 49%. Electronics exports are subject to tariffs ranging from 1.2% to 10.8%. Only certain products such as pharmaceuticals and semiconductors are exempt from these tariffs. 

In response, India approached the World Trade Organization with a proposal to implement retaliatory duties against the United States on steel and aluminium to recover the $1.91 billion collected by America as additional duties. This could affect imports of products worth $7.6 billion into the US.

India is actively negotiating with the US to eliminate tariffs on American goods. India has, as a response, also imposed tariffs up to a 100% on American goods. While raw materials and mineral fuels have tariffs around 1%, specific agricultural products like dairy and meats have 100% tariffs.

The tariffs implemented by the United States can have several consequences.  The higher costs of textiles and pharmaceuticals reduce competitiveness in the market. Businesses may hesitate to invest in export driven industries due to the unpredictable tariff policies. Several sectors such as manufacturing and textiles are reliant on U.S. trade and these sectors may experience layoffs. The rupee could weaken due to the decline in exports affecting India’s foreign exchange reserves. 

More than that, these tariffs are a narrow aspect of broader trade relations between the U.S. and India. As U.S.-China trade tensions ease, India emerges as a beneficiary for the realignment of the global supply chain. Companies are looking beyond China, and India, with its improving infrastructure and business-friendly reforms appears as an attractive alternative. India and the U.S. are negotiating a bilateral trade agreement aimed at increasing trade to $500 billion by 2030. This includes tariff reductions and deeper collaboration in critical technology sectors like defence and electronics. 

India’s response to U.S. tariffs highlights the delicate balance between trade protection, economic growth, and global supply chain adaptation. As India positions itself as a key player in global trade realignment, its ability to navigate tariff policies, forge strong economic partnerships, and enhance domestic competitiveness will determine its success. Looking ahead, India's approach will shape not only its own trade future but also broader shifts in global economic dynamics.

~Rachan R Rai

Grade 10