Those who had hoped for a last-minute pause of the additional 25 percent tariffs on Indian exports to the US would be disappointed.
With no settlement signed or even negotiated, the US department of homeland security on Tuesday notified “the punitive tariffs on Indian goods entered for consumption, or withdrawn from warehouse for consumption” from 9.31 am IST on Wednesday would attract the heightened levies.
The signals have been pointing in this direction. First, the US trade team, expected in India on August 25, deferred its visit. American rhetoric has been aggressive too; Vice President J D Vance on Sunday stated “aggressive economic leverage” including “secondary tariffs on India” had been applied to force Russia to stop bombing Ukraine.
It is to the credit of India that it has stood up to the armtwisting. Speaking in Ahmedabad on Sunday, Prime Minister Narendra Modi stated, “No matter how much pressure comes, we will keep increasing our strength to withstand it… The government will never let harm come the way of small entrepreneurs, farmers, livestock rearers.”
The government has also rightly decided to diversify its trading options. Russian crude purchases, which were suspended in July, have been resumed, with several Indian refiners placing orders for loading in September and October.
While the PM called for ‘self-reliance’, RBI Governor Sanjay Malhotra pledged the central bank “would not be found wanting” in providing additional liquidity to guard against the tariff impact.
India, which has been reaching out to Russia and China, has made it clear it intends to more than double its trade with Russia, targeting $100 billion by 2030. Meanwhile, it must keep its US options open too, as the latter needs India as a counterweight to China.
India has surpassed China as the top smartphone exporter with a 44 percent share of the US market, largely driven by Apple’s strategy to diversify production. Indian exports to the US are at about $85 billion and cannot be replaced overnight without hurting American consumers.
Peace or a pause in Ukraine could soon end the rationale behind the punitive tariffs. Thus, the expectation among some pundits that the trade talks could resume after a short hiatus is not misplaced. The government should use this period, meanwhile, to develop domestic demand and stronger, alternative regional trade routes.