Where tariffs trump economics, Pg8

Key Highlights:

• Reciprocal Tariffs: The U.S. announced new reciprocal tariffs affecting a range of goods, particularly from South and Southeast Asia. These tariffs aim to counter trade deficits and protect domestic industries but risk triggering global trade tensions.
  • Asia Hit the Hardest: Countries like Vietnam, Cambodia, Malaysia, Thailand, Indonesia, and India face the sharpest tariff hikes. For example, Vietnam and Cambodia saw 46% and 49% tariffs, respectively, threatening critical sectors like garment exports.
  • India’s Exposure: If tariffs persist, India stands to lose $7.6 billion in exports to the U.S. (6.4% of total merchandise exports to U.S. in 2024). This underscores the urgency to secure trade diversification.
  • Distorted Tariff Calculation Method: The U.S. method calculates tariffs based on trade deficits but ignores services. This one-size-fits-all approach fails to reflect actual economic interdependence. Analysis & Way Forward:
• India must adopt a multi-pronged strategy: - Negotiate a balanced trade deal with the U.S. - Fast-track FTAs with EU, U.K., Canada. - Strengthen ties with China, Russia, Japan, and ASEAN. - Improve export infrastructure, rationalise tariffs, and standardise quality protocols. - The Apple iPhone export success shows potential: India exported $437 billion worth of goods in FY24, same as FY23, despite global challenges. It proves the value of policy clarity and competitive manufacturing.

Mains Mock Question:

Discuss the impact of protectionist tariff policies on India's external trade sector. How should India recalibrate its export strategy to mitigate vulnerabilities arising from global trade wars?