Trump Imposes 10% Tariff on India, Anticipated Impact Remains Minimal
New Delhi: The US Trade Representative has imposed a 10% tariff on India and several other countries due to concerns over forced labor in imported goods. This permanent levy, effective from Friday, replaces a temporary 10% import duty and is not expected to significantly impact trade. Although the tariff is lower than the proposed 12.5% for India, the country faces additional risks from a second investigation into structural overcapacity affecting over a dozen nations.
Tariff Details and Implications
The new tariff affects approximately 70% of India’s exports to the US, which will now incur Most Favored Nation (MFN) tariffs plus the additional 10% Section 301 duty. Products subject to Section 232 tariffs, such as auto parts and certain metal products, will continue to face higher tariffs ranging from 25% to 50%. The US has indicated that countries like Bangladesh, Pakistan, Sri Lanka, and others will also be subjected to the same 10% levy, while around 40 countries will face tariffs of 12.5%.
India has contested the US probe, asserting that it has regulations in place to prevent the use of forced labor. In response to US concerns, India amended its Foreign Trade Policy to ban imports produced using forced or compulsory labor. Trade research body GTRI noted that the US has not provided credible evidence linking India to forced labor practices.
Oil Prices Surge
In a separate development, the Indian basket of crude oil surged by 11% to $103.33 per barrel, marking the highest price in two months. This increase is attributed to disruptions in the Strait of Hormuz and attacks on shipping vessels in the Red Sea. The global benchmark Brent crude also crossed the $100-per-barrel threshold before easing slightly to $97.08.
The rise in crude oil prices has implications for Indian oil marketing companies, which may face under-recoveries if retail prices remain unchanged. India imports nearly 90% of its crude oil, and the international Free-On-Board (FOB) prices for petrol and diesel have risen significantly. In July, the average FOB price for diesel was $129.8 per barrel, up from $120 in June, while petrol averaged $103.3, slightly lower than June’s $107.8.
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