By SHIVAJI SARKAR
One man has rewritten world trade rules. Reciprocity is the name of the game. Difficult to find fault with his arguments. What you are doing to America, President Donald Trump has now decided to do to you. Cold war having gone, scope for others to play off one superpower against the other is not available.
Challenging times ahead for world leaders and diplomats. The World Trade Organisaton (WTO) better self deport itself from the scene! In a world in turmoil unilateralism replaces multilateralism?
India certainly is in a quagmire as all WTO principles and protection walls are being felled with 26 per cent tariff, 50 per cent of 52 per cent allegedly being charged by it. The reciprocal tariff is in addition to the existing one. The automobiles or parts have 25 per cent tariff and another 26 per cent are to be levied. It could hit the country’s major export pillar, the IT services.
But that is not the peak of absurdity. In his absurd passion with world tariffs fuelled by zeal for bulldozing world order, Trump has imposed 10 per cent tariff on an uninhabited volcanic Heard and McDonald islands, one of the remotest places on earth, home to Penguins, near Antarctica, an external territory of Australia, reached by a two-week boat ride from Perth.
The last visit to this man-forsaken place from people believed to be nearly 10 years ago. But data show that the US had imports of $15,000 to $325,000 machineries a year during the past five years!
Such tariff-hit territories include Cocos (Keeling) Islands, Christmas Island and Norfolk Island. Norfolk, a 2000-inhabited island gets 29 per cent tariff for its tiny footwear exports of $ 655,000 to the US. The islands are part of Australia leading Australian Prime Minister Anthony Albanese react, on April 3, a day after Trumpelling moves roiling the world, “Nowhere on earth is safe”.
India thus is not in an unviable position. At best it can wonder whether it would still remain fascinated with the New World as the order collapses. Would it look for new trade avenues? It is trying but has not yet found a lucrative market, even as the US sinks it remains “superpower”.
It knows that the US system itself has gone beyond sane moves forcing India to extend a number of concessions even in pro-Trump, or better say Joe Biden days, on agriculture and other products. More it yields, more it is being subjected to shed.
India needs a charter for negotiating world chaos. It was once in the forefront of establishing multilateralism since its glorious Non-Aligned Movement. It has lost the edge during the 30 years of globalisation, getting closer to the US may be fascinated by its economic power, and now as Trump announces April 2 as Liberation Day, it is looking for new avenues.
The new tariffs include a universal 10 per cent duty on all imports into the US starting from April 5, with an additional 16 per cent to be applied from April 10. The reciprocal tariff imposed is a big blow to India’s exports, affecting multiple industries.
Key sectors could be hit. Ranging from small to big, company revenues are likely to fall. India has a trade surplus of $46 billion. Hit by the big brother, it may slash import duties worth $23 billion on US goods, including gems, jewellery, pharmaceuticals, and auto parts. Would that soften the blow?
India’s top exports to the US are engineering goods $17.6 billion (bn) in 2023-24, and $18.6 bn in 2022-23; electronic goods 10.1 bn and $5.7 bn; gems and jewellery $9.9 bn and $12.5 bn; pharmaceuticals $8.7 bn and 7.5 bn; textiles $9.2 bn and $9.7 bn; and petroleum products $10.10 bn and $5.8 bn. The imports are $5.2 bn petroleum oil in 2023-24 and $10 bn in 2022-23; petroleum gases $1.2 bn and $1.9 bn; petroleum coke $1.54 bn and $1.9 bn; aircraft $2.09 bn and $2.11 bn and nuts $1.02 bn and $1.11 bn.
The new tariffs are likely to have short-term and long-term implications for overall economy, trade relations, currency markets, investments in businesses and stock markets. There is a view that compared to other countries like China 54 per cent tariff, Vietnam 46 per cent, Thailand 36 per cent, Taiwan and Indonesia 32 per cent each, impact less on India. The reality may be harsher and the industry would have to make wider adjustments, do cost cutting and reduce prices of products.
The tariffs are likely to hit autos, pharmaceuticals and IT. Additional duties may hit hard automobiles and auto parts, cars and light trucks. Tata Motors—the parent company of Jaguar Land Rover, which exports to the US—saw its shares fall 5 per cent following the tariff announcement, while Sona Comstar, an Indian global automotive systems manufacturer, declined 4 per cent.
The pharmaceutical sector may also come under pressure. Although specific tariff rates are yet to be detailed, the US remains a key market for Indian drug exports, and any hike in duties could impact revenue. However, pharma products have reportedly been exempted from the latest round of US reciprocal tariffs.
Sectors such as steel and agriculture are likely to be hit, with the impact first reflected in the stock market. Indian equities may come under pressure, particularly export-driven sectors like pharmaceuticals and IT, amid fears of retaliation. It could disrupt global supply chains.
Rising trade tensions may weigh on the rupee and dampen FDI, though domestic stimulus could cushion some of the blow. Japan’s auto sector may face export hurdles, pressuring the Nikkei. Globally, a risk-off sentiment could boost the US dollar and Treasuries. Investors should closely track retaliatory moves and sector-specific vulnerabilities.
India’s diplomacy will be changing on the pattern summed up best by Minister for External Affairs, who in 2022 said, “This is a time for us to engage America, manage China, cultivate Europe, reassure Russia, bring Japan into play, draw neighbours in, extend the neighbourhood and expand traditional constituencies of support.” China may emerge as a friend and the US may not be a foe in the new order as trade diversifies. (INFA)
