31st July 2025 (13 Topics)
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25% US Tariff on Indian Exports
Context:
The United States has announced a 25% tariff on select Indian exports amid stalled trade negotiations, with significant implications for India’s export-driven sectors.
Key Sectors Affected:
- The tariff primarily targets labour-intensive sectors such as marine products (especially shrimps), textiles, pharmaceuticals, automobiles, iron & steel, and leather goods.
- The pharmaceutical sector may face incremental downside risk as the US accounts for over 30% of India’s pharma exports, particularly in generics.
Strategic Trade Concerns:
- Competing Asian economies (e.g., Vietnam at 20%, Indonesia at 19%, Japan at 15%) have secured preferential tariff access, thereby eroding India’s relative competitiveness in the US market.
- The tariff differential especially disadvantages India in labour-intensive and electronic goods sectors where ASEAN peers hold a cost advantage.
Long-Term Outlook:
- Experts caution against a rushed trade agreement, especially if it entails politically sensitive concessions in agriculture and dairy
- A well-calibrated deal, like the India-UK FTA template, could unlock preferential access without compromising domestic livelihood safeguards.
- Despite short-term headwinds, India's service exports, which reached $387.5 billion in FY25, are expected to cushion the overall impact.
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