Background
- Former U.S. President Donald Trump imposed sweeping tariffs on several countries, including India. Around 10% universal tariffs were imposed, invoking emergency provisions.
- A U.S. top court order has now restricted arbitrary tariff imposition, limiting executive discretion.
- The tariffs were justified under national emergency and trade expansion laws.
- The decision has implications not only within the U.S. but also for global trade partners.
How the New Tariff Structure Affects Countries
- Countries Facing Higher Tariffs
- Major exporters like India, China, Japan, South Korea, and EU nations faced tariff pressures.
- Section 232 tariffs targeted steel, aluminium, automobiles, and auto components.
- Section 301 tariffs focused on goods from countries accused of unfair trade practices.
- India and China were particularly affected due to large export exposure.
- Countries Facing Relief
- Some countries such as Canada, Mexico, Brazil, and Chile saw lower tariff burdens.
- Temporary relief remains uncertain due to political and legal contestation.
- India vs China: Comparative Impact
- Tariffs on Indian goods were initially around 25%, later reduced to 18%. China faced significantly higher tariffs of nearly 55%.
- This gives India a relative advantage over China in certain sectors. However, the advantage is limited because the U.S. still remains unpredictable.
Broader Global Trade Concerns
- The use of national security clauses to justify tariffs weakens WTO principles.
- Trade wars between major economies increase global economic fragmentation.
- Retaliatory tariffs from countries like China and the EU deepen tensions.
- Supply chains are being restructured toward strategic blocs.
- Protectionism risks undermining decades of trade liberalisation.
Economic Implications for India
- Short-Term Impacts
- Reduced tariffs may improve competitiveness of Indian steel, aluminium, and auto exports.
- Lower barriers can support export recovery in a slowing global economy.
- Indian exporters gain marginal relief compared to China.
- Structural Concerns
- Trade uncertainty discourages long-term investment planning.
- Frequent tariff changes create volatility in supply chains.
- Indian firms dependent on U.S. markets remain vulnerable to policy shifts.
- Strategic Lessons for India
- India must reduce overdependence on any single export destination.
- Diversifying trade toward EU, ASEAN, Africa, and Latin America is essential.
- Strengthening domestic manufacturing under Make in India and PLI schemes remains critical.
- India should actively use WTO dispute mechanisms where appropriate.
- Trade diplomacy must balance strategic partnerships with economic interests.
Conclusion: The reduction in U.S. tariffs offers temporary relief to Indian exporters. However, the deeper issue is the increasing unpredictability of global trade governance. For India, the challenge is not merely adjusting to tariffs but preparing for a world where trade policy is shaped by strategic rivalry and domestic politics. Sustainable growth will depend on diversification, competitiveness, and strategic autonomy.