High taxes by US can benefit India
The United States has pushed many countries to the wall by announcing huge taxes on trade. Experts have been warning of a slump in global trade if the phenomenon continues and the issues of raised taxes on trade is not addressed.
Notably, the two major world powers China and the US have at loggerhead over mutual trade as the new US leadership under Donald Trump imposed a heavy tax on Chinese goods in the country. China also played tit-for-tat and announced imposition of huge taxes on goods procured from the US.
For now the trade war between the two major economies of the world has not been resolved even though some measures have been announced.
For China, at stake is its exports to the US worth USD 439.9 billion last year while US exports to China totalled to USD 143 billion. This figure reflects trade carried out by the two giants in just twelve months.
Notably, the tariff and trade war were unilaterally initiated by the United States and China followed suit. Though nothing concrete can be said at this juncture but if any negotiations are to be held, both the parties need to demonstrate sincerity and make preparations and take concrete actions on issues such as correcting erroneous practices and lifting the unilateral tariffs.
Meanwhile, the US has imposed heavy taxes on various others countries like Canada and Mexico. Though, the move can have huge repercussions but for India the move can spell an opening as our exports to the US will become more competitive following imposition of higher tariffs by the Trump administration.
There will be significant opportunities for India in the US markets both in terms of the number of products and volume of the US market. India is expected to gain competitiveness in 22 out of the top 30 categories (HS 2 level), representing a market size of USD 2,285.2 billion.
Notably, China, Canada, and Mexico are the leading exporters to the US in these categories, therefore higher tariffs on these countries at 30 per cent, 35 per cent, and 25 per cent, respectively, will enhance India’s competitiveness.
India’s competitiveness will remain unchanged in 6 out of 30 categories, amounting for 32.8 per cent exports to the US and 26 per cent of the US total imports, amounting to USD 26.5 billion.
While for six product categories at HS 2 level, India faces a higher average tariff (between 1-3 per cent) which can be negotiated with the US. In 78 products, accounting for 52 per cent of India’s exports and 26 per cent share in total US imports,
For 17 products (accounting for 28 per cent of India’s export to the US) out of the top 100 products at the HS-4 level, India’s competitiveness remains unchanged due to no change in tariff differential.
Interestingly, India’s merchandise exports to the US rose 21.78 per cent to USD 17.25 billion in April-May this fiscal year, while imports rose 25.8 per cent to USD 8.87 billion.
