Trump’s Tariff War: Assessing the Impact of Potential Deals on Companies and Sectors

SBI Research has indicated that India is poised to diversify its export markets, potentially mitigating any adverse effects from a less favorable trade deal with the United States. As negotiations for an interim trade agreement between India and the US progress, the focus remains on the tariff rates that may be imposed. With a deadline set for August 1, 2025, the outcome of these discussions could significantly impact India’s trade landscape.

India’s Export Diversification Potential

SBI Research asserts that even if the anticipated trade deal with the US does not materialize as hoped, India has ample opportunities to diversify its exports. The report emphasizes that India’s service exports are on track to reach an impressive $387.5 billion by 2024-25, driven largely by strong performances in the IT, financial, and business services sectors. This growth suggests that the overall export figures may not be severely affected, even with the imposition of additional tariffs.

The US has implemented tariffs on over 20 countries, with Asian nations facing steeper rates than India. This situation presents India with a unique opportunity to enhance its exports to the US, particularly in sectors where it holds a comparative advantage. For instance, following a trade agreement with the US, Vietnam has benefited from a reduced tariff rate of 20%. The extent to which India can negotiate similar reductions remains uncertain, but the potential for growth in sectors like chemicals and pharmaceuticals is significant.

Opportunities in Chemicals and Apparel Exports

SBI’s analysis highlights that India currently enjoys a relative advantage in chemicals among the top five US imports. While China and Singapore dominate this market, the high tariffs imposed on China create an opening for India to expand its chemical and pharmaceutical exports to the US. If India can negotiate tariff reductions below the current 25% applicable to Singapore, it could capture a portion of the market share. The report suggests that even a modest increase of 2% in market share could contribute 0.2% to India’s GDP.

In addition to chemicals, there is potential for India to increase its apparel exports. Currently, India accounts for 6% of US apparel imports, and capturing an additional 5% from competitors like Bangladesh, Cambodia, and Indonesia could add 0.1% to GDP. These opportunities underscore the importance of strategic negotiations in the ongoing trade discussions.

Exploring Markets Beyond the US

India is also looking beyond the US for trade opportunities. The country is reviewing the ASEAN-India Free Trade Agreement to address tariff irregularities and strengthen rules of origin provisions. This review aims to curb the influx of Chinese goods through ASEAN nations, which have become significant trading partners for India, with bilateral trade projected to reach $123 billion by 2024-25.

Furthermore, India can enhance its exports to Asian countries currently facing high US tariffs. There are opportunities to increase shipments of chemicals, agricultural goods, livestock products, and processed items to these markets. By diversifying its export destinations, India can reduce its reliance on the US market and bolster its overall trade position.

Current Status of the India-US Trade Deal

As negotiations for the India-US trade deal continue, the final decision is expected soon, with a mini trade deal likely to be announced by mid-July. India has reportedly submitted a comprehensive offer covering goods trade worth between $150 billion and $200 billion. Despite the urgency, India has expressed its preference not to operate under strict deadlines for trade agreements.

Commerce Minister Piyush Goyal has indicated that discussions are progressing rapidly. However, India has taken a firm stance on agriculture and dairy products, which may be excluded from the interim trade deal. As both nations work towards a resolution, the outcome of these negotiations will play a crucial role in shaping the future of India’s trade relations with the US.

Observer Voice is the one stop site for National, International news, Sports, Editor’s Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.

Follow Us on Twitter, Instagram, Facebook, & LinkedIn