Trump’s 50% Tariff May Risk ₹3-Lakh-Cr Exports, Shave Off 1% GDP Growth: Indian Economist
The ongoing trade tensions between the United States and India have taken a worrisome turn, with US President Donald Trump’s recent decision to double tariffs on India to 50%. According to UBS Chief India Economist Tanvee Gupta Jain, this move may put India’s exports worth up to $35 billion ( ₹3 lakh crore) at risk. Moreover, it could also shave off India’s GDP growth by 1% over the next two years. In this blog post, we will delve into the implications of Trump’s tariff hike and its potential impact on India’s economy.
As reported by the Indian Express, India exported $45.8 billion more goods to the US than it imported from the US in 2020. This significant trade surplus has been a major bone of contention between the two countries. The US has been critical of India’s trade practices, citing issues such as high tariffs, intellectual property concerns, and unfair trade practices. In response, Trump has taken the drastic step of doubling tariffs on India to 50%, effective from June 1st.
Gupta Jain, in an interview with the Indian Express, warned that Trump’s tariff hike could have far-reaching consequences for India’s economy. She stated, “Around 30-35 billion of India’s merchandise exports to America are at risk from Trump’s tariffs. This could lead to a significant decline in India’s exports to the US, which could impact the country’s GDP growth.”
India’s exports to the US are primarily driven by sectors such as pharmaceuticals, automobiles, and textiles. A 50% tariff on these goods could lead to a significant increase in costs, making them less competitive in the US market. This could result in a decline in exports, which could have a ripple effect on the overall economy.
Moreover, Gupta Jain’s warning of a 1% decline in India’s GDP growth over the next two years is a sobering reminder of the potential consequences of Trump’s tariff hike. A decline of this magnitude could have significant implications for India’s economic growth, employment, and overall development.
The impact of Trump’s tariff hike is not limited to India’s exports alone. It could also have a broader impact on the Indian economy, including:
- Inflation: A decline in exports could lead to a surge in imports, which could put upward pressure on prices, leading to inflation.
- Employment: A decline in exports could result in job losses, particularly in sectors such as manufacturing and textiles.
- Investment: The uncertainty created by Trump’s tariff hike could deter foreign investment, which is critical for India’s economic growth.
In conclusion, Trump’s decision to double tariffs on India to 50% is a significant development that could have far-reaching consequences for India’s economy. While India has been critical of the US’s trade practices, a tit-for-tat approach may not be the most effective way to resolve the issue.
Instead, India should focus on engaging with the US in a constructive manner, highlighting its own export concerns and seeking a mutually beneficial solution. The Indian government should also take steps to diversify its exports, reducing its reliance on a single market.
In the meantime, Indian businesses and policymakers must prepare for the potential impact of Trump’s tariff hike, developing strategies to mitigate its effects and protect India’s economic interests.
