Understanding Tariffs: How They Work, Their Economic Impact, and Donald Trump’s Key Announcements
Tariffs Explained: What are tariffs, and why do governments impose them? Learn how tariffs impact international trade, domestic industries, and consumer prices.
Tariff and Reciprocal Tariff: Tariffs are essentially taxes imposed on goods imported from other countries. These taxes can significantly impact international trade and have ripple effects on economies worldwide, including those of the United States and India.
US President Donald Trump’s decision to impose a 25% tariff on imports from Mexico and Canada has ignited fears of a potential trade war in North America. This move, effective immediately, is aimed at addressing concerns related to drug trafficking, illegal immigration, and trade imbalances. However, experts warn that these tariffs could contribute to inflation and hinder economic growth.
It may cause a fear of reciprocal tariff and trade war. A reciprocal tariff is taken by a country in retaliation to another country for increasing the tariff on imports. When a country increases tariffs on goods imported from other countries, it eventually makes them costlier in the country. In some instances, the trade war may be beneficial for India. However, experts warn that excessive tariffs will lead to a full-blown trade war.
“This can help Indian exporters in sectors such as agriculture, engineering, machine tools, garments, textiles, chemicals and leather,” president-designate of the Federation of Indian Export Organizations (FIEO) S.C. Ralhan was quoted in a PTI report.
The Ripple Effect: Indian Steel Industry Braces for Impact
The US tariffs on goods from China, Mexico, and Canada have unintended consequences for industries globally. For instance, the Indian steel industry is bracing for a potential influx of cheap Chinese steel. With the US market becoming less accessible for Chinese steel exports due to the tariffs, experts predict that China might redirect its surplus steel production towards other markets, including India.
This situation poses a challenge for Indian steel producers, especially as they are currently undergoing a phase of capacity expansion. An influx of cheaper Chinese steel could undercut local prices, erode profit margins, and potentially disrupt the industry’s long-term growth trajectory. Indian industry leaders are urging the government to implement measures to safeguard the domestic steel sector from the potential fallout of this global trade war.
Amidst escalating trade tensions sparked by US tariff hikes on Chinese, Canadian, and Mexican imports, Jayant Dasgupta, former Indian Ambassador to the World Trade Organisation, downplayed concerns about their impact on Indian agricultural exports.
Speaking to CNBC TV18, he said that it will follow retaliatory tariffs from Canada and China targeting billions of dollars worth of US goods. While acknowledging the potential disruption to global supply chains, Dasgupta highlighted India’s relatively modest agricultural exports to the US, citing coffee, tea, beverages (approximately $390 million annually), shrimp, and fish (about $2 billion). He emphasised that while a comprehensive 100% tariff on all US agricultural imports would pose a challenge, the current scenario is unlikely to significantly impact India’s export volumes.
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