Summary of "Trump's tariff war on India in numbers: Which sectors will be worst-hit, when, what’s exempt & why"
Summary of Key Financial Strategies, Market Analyses, and Business Trends:
- Trump’s Tariff Policy on India:
- The U.S. imposed an additional 25% secondary tariff on Indian imports, adding to an existing 25% tariff, effectively doubling tariffs on many Indian goods to around 50%, pricing them out of the U.S. market.
- Tariffs are calculated over the Most Favored Nation (MFN) base tariff rates, which are generally low (1-6%), so the effective tariff can be slightly above 50%.
- The U.S.-India trade relationship is complex: India has a significant trade surplus with the U.S. (~$40 billion), while India runs a large trade deficit with China.
- The largest portion of U.S. economy and trade is services (~86%), which currently are not subject to tariffs, benefiting India’s strong service exports.
- Sectors Worst-Hit by Tariffs:
- Diamonds, Gold, and Jewelry: Over $10 billion in exports; tariffs raised from 2.1% to 52.1%. India mostly imports raw Gold/gems, adds value, and re-exports.
- Shrimp and Seafood: $2+ billion exports; will be severely affected by 50%+ tariffs, threatening thousands of jobs, especially fisherwomen.
- Carpets: $1.2 billion exports; significant employment impact in traditional manufacturing hubs.
- Apparel (Knitted and Woven Garments): Each about $2.7 billion; tariffs increased to ~60%, risking hundreds of thousands of jobs.
- Organic Chemicals, Steel, Aluminum, Copper, Machinery: Tariffs raised to over 50%, pricing these out of the U.S. market.
- Sectors Exempt or Temporarily Exempt from Tariffs:
- Pharmaceuticals and Medical Equipment: $10-12 billion exports; currently exempt but Trump has indicated plans to impose tariffs (up to 250%) eventually to encourage domestic manufacturing.
- Smartphones (notably Apple iPhones): Largest single export item (~$11 billion), exempt due to specific agreements with Apple manufacturing in India.
- Petroleum and Energy Products: Exempt, despite political tensions related to crude oil sourcing.
- Agricultural Products: Growing bilateral trade with $6-7 billion Indian exports to the U.S. and $3-3.5 billion U.S. exports to India. Key U.S. exports include tree nuts (almonds, pistachios), ethanol, soybean oil, and cotton.
- Indian farmers are largely protected from U.S. imports as many U.S. agricultural products do not compete directly with Indian produce.
- Soybean oil imports are significant and mostly genetically modified (GM), a point of contention in India.
- Trade Deficits and Surpluses:
- U.S. has a large trade deficit (~$700 billion), with $300 billion deficit from China despite tariffs.
- India’s trade deficit with China is about $10 billion.
- Trump’s tariffs have targeted top 15 U.S. trading partners, affecting allies and adversaries alike, creating global trade uncertainty.
- Tariff Implementation and Exemptions Methodology:
- Tariff exemptions are based on HS codes (Harmonized System codes) — internationally standardized codes classifying traded products.
- The April 2nd executive order (EO 14257) lists exempt HS codes in Annex 2.
- Amendments (e.g., April 11th) have added exemptions such as smartphones with specific HS codes.
- Tariffs of 25% are imposed on all other goods not listed as exempt.
- A grace period exists:
- Goods shipped before August 27 are exempt from new tariffs.
- Goods shipped by August 27 have until September 17 to clear U.S. customs without tariffs.
- This grace period allows Indian exporters and negotiators time to adjust and negotiate.
- The U.S. trade negotiating team is scheduled to visit India before these deadlines.
- Political and Strategic Context:
- China has criticized U.S. tariffs on India, positioning itself as a defender of India’s sovereignty, while also trolling both India and the U.S.
- The U.S. aims to revive domestic manufacturing, especially in pharma and other strategic sectors.
- Indian leadership emphasizes protecting farmers, fisherfolk, and vulnerable sectors from unfair foreign competition.
- The tariff war affects jobs significantly in India’s export-dependent sectors.
- The U.S. administration’s approach is chaotic and unpredictable, with frequent amendments and lack of clear communication with allies.
Step-by-Step Guide to Understanding Tariff Application:
- Identify the product’s HS code.
- Check Annex 2 of EO 14257 (April 2nd executive order) for exemption status.
- Consider amendments (e.g., April ...
Category
Business and Finance
