How may US tariff hit pharmaceuticals, smartphone, farm sectors of India? It may cause loss of ...

After US President Donald Trump announced a 25% tariff "plus" an additional penalty if New Delhi continues to buy crude oil and military equipment from Russia, India is most likely to be hit hard. A rough estimate indicates an export loss of about $5 billion. It may further be complicated by the loss of jobs, many in the MSME sector. If India decides to placate Washington and increase imports to narrow its trade surplus, it faces the risk of being flooded with cheaper products, much to the chagrin of its old allies and business partners. 

How did Donald Trump justify US Tariff on India?

Justifying his decision to impose an unexpectedly high tariff, Donald Trump took to the social media platform Truth Social as he wrote in a post, "Remember, while India is our friend, we have, over the years, done relatively little business with them because their Tariffs are far too high, among the highest in the World". His misplaced anger and frustration become clear as he adds to his post, "They have always bought a vast majority of their military equipment from Russia, and are Russia's largest buyer of ENERGY, along with China, at a time when everyone wants Russia to STOP THE KILLING IN UKRAINE".

He added further, "ALL THINGS NOT GOOD! INDIA WILL THEREFORE BE PAYING A TARIFF OF 25%, PLUS A PENALTY FOR THE ABOVE, STARTING ON AUGUST FIRST." He also accused his 'friend' India of having "the most strenuous and obnoxious non-monetary Trade Barriers of any Country".

Will new tariffs derail BTA talks?

In an exclusive interaction with ANI, the founder of the Global Trade Research Initiative, Ajay Srivastava, said that the sector-wise impact of the US reciprocal tariffs will be worth watching, and the impact of the trade tariffs on other countries will also determine the ultimate fall of tariffs on India. Earlier on Tuesday, just days ahead of the self-imposed August 1 deadline date for tariffs to come into effect, US President Donald Trump stated that the India-US trade deal was "working out very well" but hinted at a 20 per cent to 25 per cent tariff on New Delhi.

Will pharmaceutical sector suffer?

Ajay Srivastava said, "Some sectors, like our top exports to the US, are pharmaceuticals and medicines, so Europe will be paying 15%, but European medicines are expensive, high-end proprietary medicines. We are into generics. So if we are paying 25%, I don't think much of the generic market exports to India; exports to the US from India will be impacted."

Will India benefit in smartphone market?

He added that for "smartphones, only two countries export to the US, especially the iPhones: China and India. So if China is paying 30% duty, India is paying 25% duty, I don't think any impact will be there. And then, petroleum products—we export about USD 4 billion."

US dilemma on farm sector

The dilemma for the US, according to Srivastava, is that while it understands India's position, announcing a trade deal without including agriculture could set a precedent. Other countries, like Japan or members of the European Union, traditionally protective of their own agricultural sectors, might then demand similar exemptions. Srivastava noted this concern could be a key reason why President Trump may have held back from finalising a trade agreement with India. Going further, Srivastava refuted the fact that the India-UK FTA has set a benchmark for the US, adding that India properly negotiated the FTA, where 26 subjects were negotiated at length, which is not the case with the US. 

(With inputs from ANI.)