US-India Tariffs | Trade Deals
The US-India tariff situation has been a hot topic in global
trade discussions. Let's break down the complexities and what they mean for
both nations.
US-India Tariffs: A Balancing Act in Global Trade
The relationship between the United States and India is one of
the most critical bilateral partnerships in the 21st century, encompassing
strategic, economic, and cultural ties. However, recent years have seen
increased friction over trade policies, particularly concerning tariffs. This
blog post delves into the intricacies of US-India tariffs and trade deal,
exploring their origins, impact, and potential future.
A Historical Glimpse: Preferential Treatment and Rising Tensions
For decades, India benefited from the Generalized System of
Preferences (GSP), a program that allowed duty-free entry for thousands of
Indian products into the US market. This was a significant boost for Indian
exporters, fostering economic growth and strengthening trade ties. However, in
2019, the Trump administration revoked India's GSP status, citing concerns over
market access barriers for American products in India. This move marked a
turning point, escalating trade tensions between the two countries.
The "Tariff King" vs. "Retaliatory Tariffs"
President Donald Trump often labeled India the "Tariff
King," criticizing its high import duties on various American goods,
including Harley-Davidson motorcycles and agricultural products. In response to
the GSP withdrawal and other US tariff impositions, India implemented
retaliatory tariffs on 28 American products, ranging from almonds and apples to
walnuts and chickpeas. This tit-for-tat approach created a complex web of
duties, impacting businesses and consumers in both nations.
The Elusive US-India Trade Deal:
Despite the ongoing tariff disputes, both countries have expressed
a desire to forge a comprehensive trade deal. Discussions have been ongoing for several years, with the aim
of addressing market access issues, reducing tariffs, and fostering a more
balanced trade relationship. However, striking a deal has proven challenging
due to divergent interests and priorities.
India has been keen on regaining its GSP status and securing
better market access for its agricultural and manufacturing products. On the
other hand, the US has pushed for greater access to the Indian market for its
dairy, medical device, and technology sectors, along with stronger intellectual
property protection.
While progress has been made on some fronts, a breakthrough on a
comprehensive trade deal remains elusive. The complexities of balancing
national interests, protecting domestic industries, and addressing regulatory
differences have made negotiations protracted and difficult.
India’s Agriculture and Dairy Market: Major Barrier in US-India Trade Deal
While the US and India are
close partners in many areas, the agriculture and dairy sectors remain the
"ultimate red line" for New Delhi Even as a trade deal is discussed in 2026, these sectors
are kept off the table for three primary reasons: livelihoods, religion, and
subsidies.
Here
is the detailed breakdown:
The "Dairy Fortress": Why India
Won’t Budge
For the United States, India
represents a massive untapped market of 1.4 billion people For India, however, the agriculture and dairy sectors
are not just "industries"—they are the social and livelihoods
backbone of the country.
1. The Livelihood Crisis (80 Million Families)
In the US, dairy is an
industrial-scale business. In India, it is a smallholder enterprise.
·
The Math of Survival:
Approximately 80 million rural Indian households depend on agriculture and
dairy for their daily income.
·
The "Price Crash" Fear: Recent reports from SBI Research (2025) suggest that
opening the market to US imports could crash domestic milk prices by 15–25%.
·
The Economic Hit: This would lead to an
estimated annual loss of over ₹1.03 lakh crore ($12 billion) for Indian
farmers, potentially driving millions into poverty.
2. The Religious Red Line: "Non-Veg Milk"
This
is perhaps the most unique cultural barrier in global trade.
·
The Feed Problem: In the
US, cattle feed can legally include animal by-products (like blood meal or bone
powder).
·
The Purity Factor: In India, cows are sacred, and
dairy products are used in religious rituals (pujas). Indian law mandates that
imported dairy must come from animals fed a 100% vegetarian diet.
·
The Impasse: The US argues this is a
non-scientific trade barrier. India views it as a non-negotiable matter of cultural
sovereignty and religious purity.
3. The "Subsidy" War
India
argues that the playing field isn't level.
·
Artificially Low Prices:
The US government provides heavy subsidies to its dairy and corn farmers. This allows US exporters to
sell products like milk powder at prices that are lower than the actual cost of
production in India.
·
Protectionism vs. Preservation: India maintains high tariffs (up to 60% on milk powder) to
"shield" its unorganized farmers from what it calls "subsidized
dumping" by American corporations.
The
Current Status (2026)
India’s commerce Minister Sh. Piyush
Goyal has consistently stated that India is ready to buy more American defense
equipment, energy (LNG), and aircraft, but agriculture and dairy are
excluded from the current BTA (Bilateral Trade Agreement) negotiations. Until a compromise is found on the "Vegetarian
Feed" certification, this remains the single biggest hurdle to a
"Free Trade" future.
The 50% Cliff: A New Era of Trade Friction
In a rapid escalation
during 2025, the US implemented two massive tariff hikes that have effectively
doubled the cost of many Indian exports entering American ports.
1. The 25% "Reciprocal" Tax
President Trump followed through on his campaign promise to
address what he termed "unfair" trade practices. Citing India’s high import
duties on American products (like Harley-Davidson motorcycles and premium
agricultural goods), the US imposed a 25% reciprocal tariff on a wide
range of Indian exports.
·
The
Logic: If India charges high
duties on US goods, the US will "reciprocate" with equal force.
·
Impact: This initial hike targeted labor-intensive
sectors like textiles, gems, jewelry, and leather goods, making
"Made in India" products significantly more expensive for American
consumers.
2. The 25% "Russian Oil" Penalty
The situation intensified on August 27, 2025, when a second 25%
additional tariff was implemented. This was a direct geopolitical penalty for India’s continued and
massive procurement of Russian crude oil following the conflict in Ukraine.
·
The
Accusation: The US administration argued
that India was buying Russian oil at a discount and reselling refined products
on the open market at a profit, thereby "funding" the Russian
economy.
·
The
Total Burden: When added to the reciprocal
tax, the cumulative tariff on most Indian goods skyrocketed to a staggering
50%.
The Economic Fallout & India's Response
The impact of this "50% tariff club" has been
profound. Indian exporters have had to pivot quickly to survive.
|
Sector |
Impact of 50% Tariff |
|
Pharmaceuticals |
Partially exempted due to US
healthcare needs, but supply chain costs are rising. |
|
Gems & Jewelry |
Significant slowdown; buyers
are looking toward competitors in Thailand and Vietnam. |
|
Information Tech |
Less affected by physical
tariffs, but strained by overall diplomatic tension. |
|
Textiles |
Major hit; Indian garments
now face a massive price disadvantage in US retail. |
0 comments:
Post a Comment