The recent announcement of US reciprocal tariffs has sent ripples across the Asia-Pacific (APAC) region, including India, with Moody’s Ratings highlighting potential disruptions in export demand. While India’s exposure to these tariffs is lower compared to other APAC economies, certain sectors like food, textiles, and pharmaceuticals are at risk. The ongoing negotiations between New Delhi and Washington are crucial in determining the extent of the impact on India’s economy.
To counter the pressure from reciprocal tariffs, the US and India are engaged in talks to potentially lower tariffs on select US products, enhance market access for US farm products, and increase US energy purchases. The aim is to establish a trade deal by the fall of 2025, which could alleviate some of the challenges posed by the tariffs.
However, India is not immune to the potential repercussions on its exports, particularly in sectors like textiles, pharmaceuticals, and agriculture. The US’s “Fair and Reciprocal Plan” seeks to match tariffs imposed by its trading partners, raising concerns about disruptions in global trade flows. India has a history of retaliating against the US, as seen in its response to previous tariffs on Indian steel and aluminum.
The US is India’s largest trading partner, with bilateral trade reaching record levels in recent years. The fluctuations in export numbers reflect the dynamic nature of the trade relationship between the two countries. Non-tariff barriers like regulatory hurdles and trade imbalances are also likely to influence the implementation of the reciprocal tariffs.
The potential sector-specific tariff hikes by the US targeting industries such as automobiles, semiconductors, and pharmaceuticals add another layer of uncertainty for APAC exporters. Countries like Vietnam, Thailand, and Japan are also vulnerable due to their trade structures and tariff differentials with the US.
The impact of these tariffs could be most pronounced in industries closely integrated with US supply chains, such as electronics, automobiles, chemicals, food, and textiles. China, facing its own set of tariffs, has so far responded with restraint, while regional currencies may face pressure due to capital outflows and a strengthening US dollar.
In conclusion, the implications of US reciprocal tariffs on APAC economies, including India, are significant and multifaceted. The ongoing negotiations between the US and India will play a crucial role in shaping the outcome and mitigating the potential disruptions in global trade flows. Stay tuned for further developments as the situation continues to evolve.
