How will India be impacted if Donald Trump imposes 25% tariff? Smartphone, pharmaceutical sectors may benefit as...

How will the Indian economy be impacted if US President Donald Trump imposes a tariff of 20-25%, as he has indicated a few hours before the deadline for reaching an agreement ends? Which sectors will be hit hard? What will happen to the steel and aluminium sectors? Will the Indian pharmaceutical sector lose its shine in the world market? Will India give greater access to its farm sectors as demanded by the US? These questions have upset the Indian corporate sector. 

How will reciprocal tariffs impact India, US?

In an exclusive interaction with ANI, the founder of the Global Trade Research Initiative, Ajay Srivastava, said that the sector-wise impact of the US reciprocal tariffs will be worth watching, and the impact of the trade tariffs on other countries will also determine the ultimate fall of tariffs on India. Earlier on Tuesday, just days ahead of the self-imposed August 1 deadline date for tariffs to come into effect, US President Donald Trump stated that the India-US trade deal was "working out very well" but hinted at a 20% to 25% tariff on New Delhi.

(PM Narendra Modi with US President Donald Trump in the White House)

Will pharmaceutical sector suffer?

"Only on August 1, when the US will be announcing such punitive tariffs on other countries, will we'll come to know whether they are charging more or less on us. Suppose he is charging 40% in some country; then we say 25% is great for us," Shrivastava said. He added, "Second is that sector-wise, for example, some sectors like our top exports to the US are pharmaceuticals and medicines, so Europe will be paying 15%, but European medicines are expensive, high-end proprietary medicines. We are into generics. So if we are paying 25%, I don't think much of the generic market exports to India; exports to the US from India will be impacted."

Will India benefit in smartphone market?

He added that for "smartphones, only two countries export to the US, especially the iPhones, China and India. So if China is paying 30% duty and India is paying 25% duty, I don't think any impact will be there. And then petroleum products, we export about USD 4 billion. There are no duties in the US announced so far on this. So with the certainty, we can talk about this after August 1." 

Speaking on the possible dateline of the announcement of the trade deal with India, Srivastava explained that the US is aware that India has already offered access to nearly all of its industrial products, which make up 95% of US exports to India, a significant gesture that should satisfy American interests. However, he noted that India cannot open up its agriculture and dairy sectors due to domestic sensitivities attached to the sector.

US dilemma on farm sector

The dilemma for the US, according to Srivastava, is that while it understands India's position, announcing a trade deal without including agriculture could set a precedent. Other countries, like Japan or members of the European Union, traditionally protective of their own agricultural sectors, might then demand similar exemptions. Srivastava noted this concern could be a key reason why President Trump may have held back from finalising a trade agreement with India. Going further, Srivastava refuted the fact that the India-UK FTA has set a benchmark for US, adding that India properly negotiated the FTA, where 26 subjects were negotiated at length, which is not the case with the US. 

(With inputs from ANI.)