New Delhi, July 31 India can still negotiate a trade deal with the US despite Donald Trump deciding to impose a 25 per cent tariff along with a penalty on the country, say economists.
India has categorically said that it will take all steps “necessary to secure our national interest, as has been the case with other trade agreements, including the latest Comprehensive Economic and Trade Agreement with the UK”.
According to economist Trinh Nguyen, Trump’s tariff move is hardly surprising.
“Is it a surprise? Not exactly. I have been thinking for a week what a US India deal look like. And to be honest, I think I saw this coming. I think India can negotiate down from this threat btw. It's not final. But how much lower and what are the costs?” Nguyen said in a post on the X social media platform.
According to her, this is a calculated threat from Trump, reminiscent of his tactics with Japan during his previous term.
“It’s a familiar playbook. Float a harsh number, generate leverage, then negotiate it down,” she explained.
“Trump has a few agendas that he wants India or PM Modi's help with. Ending that Ukraine War is one. And India is not interested in that. It's an emerging country that buys where it can cheapest. Russian oil is cheapest and so it buys from Russia and Trump wants to starve Russia of oil revenue. India doesn't want to not buy the cheapest oil possible. Besides, Russia is neither a foe nor a friend,” she mentioned.
According to Nguyen, even the European Union and Japan received only a partial reprieve, settling at 15 per cent tariffs on key sectors like automobiles. “For India, 15 per cent might be the best-case scenario, but even that won’t come cheap,” she added.
The second thing that Trump wants is to boast that he has opened India's massive market to US exporters, which is a win-win.
“India-UK deal shows that India is opening up but India is doing it at its own stride. As in, very gradually and in sectors that it feels it doesn't need to protect (ultra luxury) and with a small quota. So on auto, Trump is going nowhere. So for him, that 25 per cent auto tariff stays. For India, maybe not worth giving away too much domestic market if I don't actually export much to the US anyway,” Nguyen noted
It can give a bit more than it gave to the UK, but the UK deal is a benchmark that domestic auto markets remain protected, she added.
According to economists, the macroeconomic impact of any hike in tariffs would be cushioned by the large size of the country’s domestic market.
A recent Morgan Stanley report had stated that India is the “best placed country in Asia”, amid the global uncertainty triggered by US President Donald Trump’s threat to jack up tariffs, because of the nation’s low goods exports to GDP ratio. “While India is exposed to direct tariff risks, we believe on balance India is less exposed to global goods trade slowdown, considering that it has the lowest goods exports to GDP ratio in the region,” the report stated.
Economists are of the view that India’s export potential also depends eventually on the amount of tariff India faces when compared with other competing nations such as China.
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