Tariff Uncertainty Poses Risk to Indian Economy Amid Global Trade Tensions

International International News

Posted by NewAdmin on 2025-05-28 08:40:10 |

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The Indian economy faces a significant risk due to tariff uncertainties, particularly in light of the 90-day pause on the 26 percent tariff on Indian exports to the United States, which is set to expire on July 9. The Finance Ministry, in its monthly economic review for April, has highlighted this as a key external vulnerability. The ministry also pointed out that the resolution of the ongoing US-China trade tensions would have implications for India's economic outlook. If new trade barriers emerge, especially from the United States, they could adversely affect Indian exports and overall trade dynamics.

Despite these concerns, there is cautious optimism. A successful trade agreement between India and the US could potentially reverse current challenges, creating opportunities for increased market access and boosting exports. Officials from the Department of Economic Affairs noted that such a deal could transform the present headwinds into tailwinds for the Indian economy. In this context, India has reportedly made substantial tariff reduction offers to the US, while simultaneously trying to maintain high import duties on sensitive agricultural commodities like food grains and dairy products.

According to sources close to the negotiations, India is willing to go as far as offering significant cuts in tariffs under a bilateral agreement, provided the deal is balanced and fair for both nations. This potential breakthrough comes as India seeks to secure an agreement before the July 9 deadline set by the Trump administration, under which new or renewed tariffs could take effect.

India is not alone in its efforts to navigate shifting trade policies. The European Union is also engaged in fast-tracked negotiations with the US to avoid a threatened 50 percent tariff. President Trump announced a delay in the imposition of these tariffs until July 9, following talks with EU officials. The EU's trade commissioner Maroš Šefčovič has focused negotiations on critical sectors such as semiconductors, automobiles, pharmaceuticals, and aluminum. Recent discussions between Trump and European Commission President Ursula von der Leyen have given new momentum to these talks.

Meanwhile, uncertainties continue in the global trade landscape, with tech companies like Apple and Samsung under scrutiny as Trump considers imposing additional tariffs unless production is relocated to the United States. The outcome of these evolving trade negotiations will play a crucial role in shaping the global economic environment and could significantly impact India’s external sector and export competitiveness in the near term.

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