INNER DYNAMICS OF US TARRIFS AND PENAL TARRIFS ON INDIA

 As per US Presidential order India has to pay 25%  tarrifs .Subsequently US declared that if India is not going to stop importing oil from Russia it has to pay penal tariff  of  additional 25%  which will come into effect after 21 days.and above the existing 25 % tariff as a penalty for the continued import of oil from Russia. Accordingly the total 50% tariff is expected to come into effect from 29th August. While existing 25% tariff alone could weaken India's exports to US, additional  proposed 25 %  penalty is  to be imposed on oil imports from Russia is expected to force  India  further to purchase crude from US. Trump has already branded India as one of the most protectionist countries with high trade and non trade  barriers limiting foreign market access and there by enabling India allegedly to maintain trade surplus with  US. Hence Trump's broader goal is by imposing tariff is to reduce the trade deficit and establish so called "balanced trade relations".Ironically he is not promoting free trade  but instead only balanced trade.Since different countries factor endowments and levels of technology are different achieving balanced trade or zero trade deficit is practically difficult in international trade.

IMPLICATIONS ON INDIA 

US has consistently remained as India's largest trading partner  generating good trade surplus particularly in recent years For instance  USA remained as the largest trading partner of India continuously in a row from 2000-01 to 2024- 25. Bilatercal trade value exceeded US $ 190 billion and India's target is to increase it to US $ 500 bilion by 2030. In 2024 India's exports to US valued $ 87.3 billion as against US exports to India which valued nearly half amounting to $ 41.5 billion resulting in goods  trade deficit to USA by  $45.8 billion.  It may be noted here that India's exports to US  mainly comprise of ready made garments, gems and jewelry, engineering goods, Pharmaceuticals, biological, telecom instruments, petroleum products, metal products  of iron and steel etc.On the otherhand main US exports to India include  crude oil ,petroleum products, coal ,cut and polished diamonds etc.

After the introduction of 25% tariff  the impact is felt on our exports as witnessed by a reduction in Basmati rice exports to US to the extent of 13% in April-July which is likely to dip further .Even if  one third of Indian exports to US are exempt from additional tarrifs domestic labour intensive export sectors including leather,chemicals ,footwear, gems and jewellery, textiles and shrimp will be severely impacted.On the contrary there is clear evidence to believe that due to strong demand for Chinese rare earth in strategic sectors of US economy  and global supply chains prompted  US to suspend tariff hike  imposed on China for 90 days till mid November.  Under the current policy US faces 10% tariff in China as against Chinese goods have to pay 30% tariff in  USA. Surprisingly among many countries are depending On oil imports from Russia. China is importing more oil from Russia than to India. Similarly countries like Turkey ,European Union and even  USA are also importing  oil or other energy resources for their energy requirements from Russia. Hence it is discriminatory that India was singled out from a long list of countries buying Russian crude oil during the war with Ukraine and likely to impose deliberately huge punitive tariff and  if negotiations fail to stop Russia Ukraine war.

INNER DYNAMICS 

Economists,diplomats and other experts attributed few illogical factors working behind the Trump's tariff policy in general towards India in particular. According to them the penal tariff of additional 25%  is  expected to implement from August end is largely a pressure tactics to concluding Indo FTA with US  interests of liberal policies on trade in agriculture, Diary farming etc.But India cannot afford to liberalise trade in agriculture or diary products because it is  bound to negatively impact the life and livelihood of marginalised farmers and rural people .Similarly on "operation Sindhoor" President Trump wants to take credit  for acting as a mediator in stopping escalation of the armed conflict between two nuclear powers India and Pakistan. US President thought that it will be treated as a great proof to claim Nobel prize for  Trump's peace initiative ,which India had bluntly rejected. Another theory is that US based Crypto firm World Liberty  Financial with more than 60 % stake by Trump's family  is successfully thriving in Pakistan and hence he tried his level best to stop the escalation of conflict between India and Pakistan. On the contrary  growing strength of BRICS+ countries especially after Russia Ukraine war and US sanctions and changing geo political equations compelled many economies to minimize excessive dependence on US dollar for transactions instead they have increasingly resorted to making payments in local currencies replacing US dollar ,which turned out to be another major irritant to US.It may be noted here that if India ha China,Russia and other BRICS members can cooperate together the entire world order can be effectively transformed. Even a concerted effort between India  and China cooperation becomes operational  systematically  India and China can strengthen cooperation with nearly 40% of population China's dominant manufacturing sector, infrastructure development, electrical vehicles, technological capabilities, contribution towards global supply chains and India's Digital and demographic dividend,scientific and technological development and highly skilled diversified and competent diaspora etc. If such advantages  are  effectively utilized the present and diversified to alternate makets and countries current tariff crisis can be overcomed within a  short period.  In any case India is set to become the second  largest power amongst the multipolar world in the long run. For meeting India's aspirations as observed by economist Jeffrey Sachs  India as the Largest populated country with second largest scientific and technological manpower should be supported by China  to become sixth permanent member in the United Nations Security Council.

CURRENT STATUS 

The inconclusive Alaska Summit on the Russia Ukraine war between US and Russian presidents give only  little hope  both in ending the geo political conflict and regarding the abolition of penal secondary tariff on import of oil by India from  Russia. While before meeting President Putin , President Trump had  claimed that India had stopped purchasing oil from Russia which New Delhi rejected outright. On the otherhand media reports also indicated Trump's observation "I think I don't have to think about that (secondary tariff on India).Now, I may have to think about it in two weeks or three weeks or something, but we don't have to think about that right now. " But he also observed about  secondary tariff,  eventhough very devastating if   required he will not hesitate to  impose it.Moreover Indo US bilateral trade agreementis likely to be delayed because US trade negotiators have postponed their visit to New Delhi for the 6th round of negotiations. Inconsistent, uncertain and discriminate trade and tariff policies across countries are doing much harm than benefit to countries involved. 

CONCLUSION 

A cursory look at American trade and tariff policies shows that President Donald Trump's tariff measures are not at all corrective but purely coercive intended to meet US hegomonic interest . As far as India is concerned adverse effects of US  tariffs  should be controlled so as to minimize the potential damage. Accordingly liberal export incentives should be provided to affected sectors like -marine products, processed food, textiles and apparels,handicrafts, footwear,handlooms sports goods etc.Indian exporters must urgently diversify and deepen their trading in non conventional and new markets(countries and Groupings)including GCC, SAARC,ASEAN, EU,BRICS, SCO, G20,BIMSTEC etc. As per experts,  Impact of US tariff is likely to reduce our GDP growth between 0.3-0.5% in the Short period. But obviously wih concerted efforts we will be able to sustain our growth momentum in the medium term itself.