Trump tariff shadow: Budget addresses US demands, backs vulnerable sectors, Pg1

Key Highlights:

• The Union Budget 2026-27 addresses US demands in ongoing trade negotiations and supports tariff-vulnerable sectors like textiles, footwear, and marine products.
• A tax holiday until 2047 is offered to foreign companies providing cloud services using Indian data centers, benefiting US tech firms.
• The budget proposes eliminating duties on aircraft components and nuclear-generation equipment, areas where the US is a global leader.
• Measures are introduced to modernize the textile sector, including capital support for machinery and schemes to boost input availability.
• A special measure facilitates sales by SEZ units to the Domestic Tariff Area (DTA) at concessional duty rates to prevent job losses.
• A Rs 10,000 crore container manufacturing scheme aims to reduce dependency on China and create a competitive ecosystem.

Detailed Insights:

• The budget aims to diversify tariff-vulnerable sectors in anticipation of potential 50% US tariffs, while also pursuing trade deals with the UK and EU.
• The tax holiday for foreign companies setting up data centers requires them to provide services to Indian customers through an Indian reseller entity.
• The SHANTI Act, 2025, already opened the nuclear power sector to private players, and the budget further incentivizes the sector with zero customs duty on related equipment until 2035.
• The textile sector modernization program includes the National Fibre Scheme, Textile Expansion and Employment Scheme, National Handloom and Handicraft programme, and Tex-Eco Initiative.
• The concessional duty rates for SEZ units selling to the DTA are a "one-time" measure to alleviate distress caused by US tariffs imposed during Donald Trump's presidency.
• The duty-free import limit for specified inputs used in processing seafood products for export is increased from 1% to 3% of the previous year’s FOB value.
• The container manufacturing scheme addresses the ongoing shortage of containers essential for trade and reduces reliance on Chinese suppliers.

Key Concepts Involved:

• SEZ (Special Economic Zone): Designated areas with simplified regulations and duty benefits to promote investment and manufacturing.
• DTA (Domestic Tariff Area): The area of a country that is not included in Special Economic Zones or free trade zones.
• FOB (Free on Board): A shipping term indicating that the seller is responsible for delivering goods to a designated port, after which the buyer assumes responsibility.