The cacophony around Donald Trump's tariff announcement is not surprising.
India can turn this phase into an opportunity like it did during the Covid pandemic and the Y2K problem.
But India Inc. must inform the government when it sees dumping.
“Tariff is the most beautiful word in the dictionary," Trump had stated numerous times.
It is said often without realising it, the 'background noise' during a chaos often emerges as a source of comfort. But as we debate the most path-breaking announcement by President Donald Trump -we all must also appreciate the fact that no one is actually a stranger to the negative effects of sound.
Trump has talked about imposing tariffs on the world since he first rose to prominence in the 1980s. People said Japan was the target. Well, in the context of India, we may 'emerge as a winner' in the escalating global tariff war unleashed by the US.
The huge advantage for India is we have 'lower duties' to shoulder than competitors.
Even government functionaries express somewhat optimism saying - India also has an early-mover advantage as it has already initiated discussions on the Bilateral Trade Agreement (BTA).
The progress is good in the bilateral trade parleys and it will give a chance to bring down duties further on Indian exports to the US from the current levels.
Moreover, the reciprocal tariffs and retaliation by China have created even more space for products like electronics, engineering goods and textiles where India and China compete directly in the US market.
Trump and his team are optimistic of using tariffs but also use the tool of 'threat' of withdrawing its security support to compel its friends and allies to accept cuts in payments due from the Federal Reserve on their US Treasury bills.
This would be a potentially massive loss to them, akin, in reality, to a US debt default. But it is tariffs that are the cutting edge of the plan.
"After decades winning in an international trading game it wrote and refereed the rules for, the US is now facing serious competition – primarily from China, but with Europe as an expensive irritant. The response of this administration is to kick over the table, and demand everyone starts again," says James Meadway in his article for 'The Guardian'.
The reference is also being made to October 1979, when Paul Volcker, newly appointed as chair of the Federal Reserve, drove up interest rates to a remarkable 13% in a bid to tackle inflation.
Soon the US was in recession.
Millions lost their jobs over the next two years, in manufacturing, where soaring interest rates had driven up the value of the dollar,
Unemployment peaked at around 10% in late 1982. But these had a long term impact in more ways than one.
The Volcker shock, more than any other single action, created the globalised world system that Trump is now bent on destroying.
Few would have bet on Volcker’s world-shaping capacity at the time. The stock market response to the shock was immediate and unanimous. US shares plunged by a record 8% in the two days after his announcement, says the piece.
Interestingly, perhaps the rolling market chaos will become too much. Perhaps the administration will blink first. There is no guarantee this extraordinary gamble will work, not even for those in the clique around Trump.
But it would be a mistake to assume it cannot work – and however the pieces now land, they will not return to their old places.
Now in the context of impact on India and Indian economy; While the US has imposed additional 26% duties on Indian imports under the reciprocal tariff plan, the tariffs on China are 34%, Vietnam 46%, Bangladesh 37%, Sri Lanka 40% and Thailand 36%.
India is the only country with which the US is deeply engaged in trade negotiations.
Among all trading partners, it is only India to which the US has sent a delegation of trade negotiators.
Closer studies reveal that while certain exports such as fisheries could lose market share to Ecuador due to lower reciprocal tariffs on that country, New Delhi can perhaps export more of the product to the EU. It is also understood that India anticipates a small impact on its pharmaceutical exports due to new US tariffs.
The US could also impose tariffs similar to what is has levied on steel imports.
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