Trump Tariff on India at 50%; Panjab Exporters to Suffer

On 6 Aug, US President Donald Trump announced an extra 25% tariff on India for the continued import of Russian crude oil. He vowed similar measures against other countries that buy, directly or indirectly, from Russia and fund its President Vladimir Putin's war on Ukraine. Trump's latest tariff on Indian goods into the US is 50%, 20% more than the tariff on China, and equivalent to Brazil. India failed to get a decent deal from the US. Though, to bridge the USD 47B goods trade gap, India pledged to buy up to USD 25B in US energy and boost defence imports, when Trump talked up a 'big' imminent deal, India hardened its stance, especially on agriculture and dairy. Negotiators even pushed for relief from the 10% average US tariff announced in April, plus a rollback of steel, aluminium, and auto duties. This is a case of overconfidence and miscalculation by India. Trump has indicated that he may even pause trade talks between the two countries until the oil issue is resolved. India is now considering reducing reliance on US goods, shift in the export basket, boost domestic market, and ease of doing business reforms. This tariff hike is set to make India's premium grain uncompetitive against rival Pakistan in a key global market. If basmati growers are compelled to switch to regular paddy, it could undermine Panjab's crop diversification efforts, which are essential to conserving groundwater resources. Pakistan's lower tariff rate will likely shift a greater share of the US market towards their exports, which currently are 50% compared to India’s 19%. The 300 export units in Ludhiana alone face a risk of USD 1153M. A leading Ludhiana-based auto components exporter to the US, who requested not to be identified, said, 'Till tariff is 25%, we remain competitive with China. If the tariff on our exports is increased, China, where steel is much cheaper, gains an advantage.' To cut costs, exporters say they may have to shift to places near ports. If and when it happens, this move could thwart Panjab’s growth (earlier coverage).