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India holds fire as Trump slaps tariffs

Overview of the U.S. Tariff Move

  • President Trump imposed reciprocal tariffs ranging from 10% to 49% on imports from various trading partners.
  • India-specific tariff: A 27% tariff has been levied on Indian exports to the U.S., despite ongoing bilateral trade negotiations.
  • The tariffs take effect in two phases:
    • 10% baseline tariff on all countries from April 5.
    • Higher reciprocal tariffs (like India’s 27%) from April 9.

Relevance : GS 2(International Relations) , GS 3(Economy)

 Legal Justification and Intent

  • Trump invoked the International Emergency Economic Powers Act (IEEPA), 1977.
  • He termed the persistent U.S. trade deficit a “national emergency”.
  • Called April 2 Liberation Day” for U.S. trade.

 Impact on Global Markets

  • Global shockwaves:
    • Japan’s Nikkei: fell 4%
    • European markets: fell >2%
    • India’s Sensex: down >300 points
    • Nifty: also declined
    • U.S. Dow Jones: fell 3% in the first hour
    • Nasdaq: plunged 4%

India’s Reaction: Muted and Measured

  • Indias Commerce Ministry:
    • Said it is “examining the implications” of U.S. tariffs.
    • Is engaging with stakeholders, exporters, and industry.
    • Studying potential opportunities arising from global trade realignments.
    • Reaffirmed India’s commitment to a Comprehensive Global Strategic Partnership with the U.S.
    • Emphasized the ongoing effort to raise bilateral trade to $500 billion by 2030.

India vs Other Affected Nations

  • Indias reaction: Subdued, focused on diplomacy and impact analysis.
  • Other countries reacted more strongly:
    • EU, China, Canada: Warned of countermeasures.
    • Japan, South Korea: Termed the move “regrettable”.
  • India appears to be preserving space for negotiations, likely avoiding escalation.

India-U.S. Trade Context

  • Trump alleged India imposes up to 52% duties on U.S. goods.
  • Despite talks on a Bilateral Trade Agreement (BTA), India still faced tariff imposition.
  • India is seeking to deepen trade ties with the U.S., possibly explaining the non-retaliatory stance.

 Geopolitical and Economic Implications

  • The tariff war could reshape global trade alignments.
  • Possibility of India capitalizing on shifting supply chains.
  • May provide India an opening in markets vacated by retaliatory actions against the U.S.

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