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The potential economic repercussions of Donald Trump's proposed tariff increases on all countries, including India, are a significant concern. While Bloomberg Economics predicts a relatively minor impact on India's economy, the implications are worth examining. Trump's proposed 60% tariff on Chinese goods and 20% tariff on other countries could lead to a global trade downturn, affecting India's competitiveness and potentially lowering its gross domestic product by 0.1% by 2028. This projected decrease stems from a combination of factors, including the global trade slowdown and India's comparatively weaker position in the international market.
The trade tensions between the US and India have escalated in recent years. Trump has criticized India's high tariffs on American products, labeling the country the “biggest charger” of tariffs. This tension reached a peak in 2019 when Trump revoked India's developing nation status, which had previously allowed the country to export many goods to the US duty-free. India responded by raising tariffs on various products, further straining the relationship. Despite these trade disputes, Trump has maintained a friendly public stance towards Indian Prime Minister Narendra Modi, even calling him a friend and “the nicest human being.” This seemingly contradictory approach highlights the complexities of the US-India trade dynamic.
Despite the potential economic drawbacks, India has options to mitigate the negative effects of Trump's trade policies. Bloomberg Economics suggests that increasing manufacturing subsidies and lowering average import tariffs could counteract the anticipated impact. Their analysis indicates that a combined approach, including a 4% production incentive and a 1 percentage-point reduction in import tariffs, could potentially boost India's GDP by 0.5% above the baseline scenario. This strategic approach emphasizes the importance of proactive measures to offset the potential economic consequences of external factors.
Source: Indian economy likely to impact from Trump proposed tariffs on all countries : Report