Given India’s own macroeconomic position, as vulnerable as it is now, it is imperative for the government to try and achieve a trade-compromise with the US in the short term at least.
The additional 25% tariff penalty imposed on India by Trump administration, taking the overall tariff level to 50%, signals a low point in US-India bilateral relationship, perhaps the lowest in the post liberalisation period for India.
A 50% tariff rate, even though projected to be imposed after a 21-day period, will not only alter India’s trade relationship with the US but also significantly impact its capital markets, while increasing its exchange rate volatility, given how deeply entwined India is, for its investment needs, on the American market.
Being cornered by Trump, India’s options now are limited to say the least. Post the liberation day announced tariff levy, India tried to negotiate in good faith and continuously. But, perhaps the gap between India’s own negotiating brief and Trump’s maximalist agenda proved too wide to bridge-and relied too heavily on the perceived gains of an existing personal dynamic between Trump and Modi, which as one can see now, didn’t have any positives for India.
For now, yes, India can seek to diversify its macro-economic integration outlook towards other countries, including a tilt more favourable towards China and Russia, as PM Modi plans to visit China later this month for the upcoming SCO meet. However, these steps are more effective in the medium-to-term period, where reorientation of demand and supply chain forces will take their own time….
https://thewire.in/trade/tariffs-india-china-russia-modi-negotiations
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