Simplifying tariff imposed by US on India

US has imposed a 26% reciprocal tariff on Indian imports but let’s first understand what is reciprocal tariff.

A reciprocal tariff is a charge/duty that a country imposes on imports from another country in response to similar tariffs applied by that country on its own exports, aiming to create a fairer trade environment by matching the tariffs imposed by other countries.

But why India imposes tariffs on US goods - It’s because to protect its domestic industries and this tariffs make it costly for U.S. companies to export goods to India. Essentially creating a barrier for US companies to compete with Indian companies in India and restrict their entry.

Now US is hitting back with this 26% tariff on our exports.

Now, what’s the impact - since tariffs are increased, the cost of Indian exported goods in US will increase thereby making US price sensitive consumers choose a local US brand over Indian brand. Indian companies like textile makers, pharma firms or even IT parts suppliers will find their goods pricier in US markets.

Smaller or mid size exporters could see sales drop and profits shrink.

Stock markets here might took a jolt. Export based firms might see their stock prices tumble, especially small ones already fighting rising costs.

Jobs could take a hit if these companies cut back production to save cash. Plus, if exports slow, the rupee might weaken, making imports like oil or US gadgets costlier for us average joes.

But it’s not all doom - India exports to many countries, not just US, so the blow might not sink us. Pharma got spared from this tariff, so they’re safe.

Now I understand that Government is already engaging in trade negotiations to secure concessions or a trade deal that could reduce the tariffs.

More to be seen as how this plays out.

Seeing that markets hasn’t dropped much today, I believe we are diversified enough. Despite this diversification, the U.S. remains a major export destination for India, particularly for sectors like IT services, engineering goods, gems and jewellery and textiles and apparel.

More developments to come as this plays out