New Delhi [India], February 17 : The impact of U.S. tariff reciprocity on Indian exports is expected to be minimal, despite concerns over trade restrictions, according to a report by State Bank of India.
The report highlighted that even if the U.S. imposes higher tariffs in the range of 15 to 20 per cent, the overall decline in Indian exports to the U.S. is estimated to be only around 3 to 3.5 per cent.
It said, "Our estimates show overall incremental tariff levels even at 15-20 per cent imposed by USA would still limit the impact on exports to US only in the range of 3-3.5 per cent which again should be negated through higher export goals".
As per the report the experts believe that this impact can be offset by India's strategic export diversification, increased value addition, and exploration of new trade routes.
The U.S. remains India's top export destination, accounting for 17.7 per cent of total exports in the financial year 2023-24. However, India's export strategy is evolving to reduce its dependence on any single market.
With growing trade ties in Europe, the Middle East, and other regions, India is working on strengthening its supply chain networks to ensure stability in exports.
While U.S. tariffs on Indian goods have remained relatively stable over the years, India's tariff policies have been more dynamic.
The report highlighted that U.S. tariff rate on Indian goods increased from 2.72 per cent in 2018 to 3.91 per cent in 2021 before slightly decreasing to 3.83 per cent in 2022. On the other hand, India's tariffs on U.S. imports have risen more significantly, from 11.59 per cent in 2018 to 15.30 per cent in 2022.
This shift in tariff structures reflects a more assertive trade policy by India, aimed at balancing trade relations while protecting domestic industries. India has been focusing on adding value to its exports, shifting from raw materials to finished goods and high-value products.
This strategy not only enhances export earnings but also reduces the potential impact of tariff hikes by ensuring that Indian goods remain competitive in global markets.
Additionally, the report added that India is actively working on alternative trade routes that connect Europe, the Middle East, and the U.S., reducing logistical costs and improving efficiency. This restructured supply chain approach is expected to strengthen India's position in international trade despite global uncertainties.
Overall, while the U.S. may introduce higher tariffs, India's proactive trade policies, export diversification, and supply chain realignment are expected to mitigate the impact, ensuring steady export growth in the long run.
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