India prepares for impact of US tariffs

Washington's new 10 to 12.5 percent tariffs on goods from 60 trading partners act as tools of coercion and intimidation, and will hurt the interests of some labor-intensive industries in India, analysts said.

They added that the levies, which took effect in late July, have become an instrument for the United States to dictate the terms of trade and impose asymmetrical pressure on any partner that "fails to play ball".

The tariffs were imposed under Section 301 of the 1974 US Trade Act by the Office of the US Trade Representative, or USTR, citing claims that these trading partners have failed to ban imports made with forced labor. They encompass 99.4 percent of total US imports from the targeted trading partners.

For India, around 45 percent of exports to the US will remain outside the scope of the additional 10 percent duty, including products that attract zero additional duties such as generic pharmaceuticals, smartphones, and certain other specified products.

Preexisting exemptions also apply to items like steel, aluminum, and auto parts under Section 232 measures. However, 55 percent of India's exports to the US will attract the additional duty.

"The (new) tariffs are now being strategically used more for geopolitical reasons than for economic (reasons)," said Professor Ray Chaudhuri, head of the economics division at the Indian Institute of Foreign Trade's Kolkata campus.

"Hence, it is majorly being used as an instrument of threat to make the countries get impacted to toe the lines of the tariff-imposer," he told China Daily.

According to Ray Chaudhuri, Washington's new tariffs will negatively impact US consumers in the short term.

In the meantime, it will certainly reduce Indian exports. "Exporters in India would be hit because alternative markets cannot be found at such short notice. For importers, it might not lead to substantial changes if the Indian authority doesn't retaliate," he noted.

In his assessment, India's labor-intensive textiles and apparel sectors will be hit the hardest by the new tariffs, while other industries may also be affected to some degree.

Sector-specific influence

Swaran Singh, a professor of international relations at Jawaharlal Nehru University in New Delhi, agreed that the influence of these tariffs will remain sector-specific.

He said India's overall effective burden may not rise sharply, though labor-intensive sectors such as textiles, jewelry, and apparel remain vulnerable given their thin margins.

Singh said the legitimacy of these additional USTR tariffs, in the name of forced-labor-produced exports, depends on the transparency of USTR's country-specific evidence.

That currently remains unpublished in detail, making independent verification difficult for any recipient country, Singh added.

"Critics argue that this new human-rights angle seeks to instrumentalize the ILO estimates of over 27.6 million in forced labor globally and that the US motive to leverage these remains pure greed rather than seriously pursuing verified enforcement gaps," he said.

Singh said that US courts are likely to dispute any evidentiary basis, noting that USTR has provided no specific findings before imposing these tariffs.

Despite the threat from the US with those enhanced tariffs, experts said that labor-intensive export industries in India and other countries can still survive and grow. This is partially due to the difficulty of substituting unique, geographically or culturally specific products for their buyers.

According to Sanjay Agarwal, the director of Sanjay Agarwal Broking Limited, the long-term impact of these tariffs on exports and imports is hard to predict, but robust domestic fundamentals across various countries, including India, could still shield their economies against such shocks.

Arunava Das is a freelance journalist for China Daily.

Contact the writers at vivienxu@chinadailyapac.com