Donald Trump, US President has put the global market on alert with his aggressive remark on import tariffs. He has threatened reciprocal taxes on goods imported from centuries that impose unfair duties on US exports.
Although, his irk is mainly directed towards large trading partners such as Europe, China, Canada and Mexico, but India is also in his radar.
Initiating Trade War
Trump says that US jobs and wealth are being given to other countries, and he would not allow it anymore. He further added- “When a country (US) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win”.
He has also proposed 25% tariff on steel imports and 10% on aluminum.
Vulnerable India Exports
Capital market will certainly feel the heat. India is ninth in the list of US’s trading partners that have a trade surplus. It means we export more to the US than we import from the country. India’s exports account for a hefty 15% of US’s aggregate trade with the world. Gems and diamonds are India’s biggest exports to the US.
As of now these exports are not on radar, but there is a risk of imposing tariff on these goods. While the direct impact of higher metal tariffs on Indian firms will be limited, there is a possibility that muted metals demand, owing to cooling off in global trade.
Trump seems very annoyed with the hike on import duties posed by Indian Government. We will certainly feel the heat and may suffer some lose in case this trade war sustains for long.