What is that tariff trap? Which Donald Trump has threatened to impose on India

Donald Trump becoming the President of America again can have a significant impact on India’s economy. Their trade policies, such as high tariffs and substitution taxes, can increase the prices of Indian products. Trump had earlier also called India a ‘big abuser of trade’, which has increased the fear that he will again escalate trade tensions like in his first term. This could have a negative impact on Indian exports, especially IT and pharmaceuticals.

However, Trump’s tough stance towards China could also be an opportunity for India. US companies may be motivated to increase investment in India to diversify their supply chains. Additionally, if Trump’s policies increase US inflation, it could bring instability to Indian markets.  Let’s talk about this issue in detail and understand what can happen from it.

1. Trump’s trade policy

Threat of high tariffs: In his first term, Trump had adopted a policy of imposing high tariffs against many countries, especially China and India. If he becomes President again, there is a fear that he may impose higher tariffs on Indian products as well. 

In the year 2022-23  India gave America  Exported 78.54 billion dollars and from America  Imported 50.24 billion dollars. This makes it clear that India is profitable in trade with America. If Trump on Indian exports  If 25% tariff is imposed, it will increase the cost of Indian products.

Substitution Tax: Trump has promised to impose substitution tax. This means that they will impose additional taxes on countries that impose high tariffs on goods imported from the US. This may increase the prices of Indian products.

2. Effect of inflation

Clothing prices: If inflation increases in the American market during Trump’s tenure, it will have a direct impact on India’s exports. Demand for labor-intensive textiles such as Indian textiles, jewelry, and leather products may decline.  India’s textile exports to America amount to approximately  It is 16 billion dollars. If demand in the US market decreases, Indian manufacturers may have to reduce production, which will increase prices.

Food prices: Food prices may also be affected by increasing inflation in America. If food items become expensive in the American market due to the steps taken by Trump, it will affect the Indian market as well. India is a major exporter of food items, including tea, coffee, and spices. If food items become expensive in America, then their prices may also increase in India.

3. Of Rs.  Price may go down against the dollar

The value of the rupee may also be affected due to Trump’s policies. If inflation rises in the US and interest rates remain stable, it could lead to a devaluation of the rupee. Suppose the value of the rupee falls by 10%, then the cost of imported goods will go up. Will increase by 10%. Due to this, consumers may have to pay higher prices.

4. Impact on foreign investment

Reduction in capital inflows: If Trump becomes president again, the high tariffs and substitution taxes implemented by him may push foreign investors out of India. Can. In the last years, India has almost  Has attracted $50 billion foreign direct investment (FDI) annually. If this flow reduces, the growth rate will be affected.

Bond Market Yields: Bond market yields may increase due to Trump’s election victory. Higher yields would mean investors can pull money out of emerging markets. If  10-year government bond yield from 3%**  4%  If it reaches Rs. 5, it may put pressure on the Indian market.

5. Impact on Indian Industry

Manufacturing Sector: Trump’s policies may have the biggest impact on the Indian manufacturing sector. If the US government imposes higher tariffs, Indian companies may have to take new measures to control their production costs. India’s manufacturing sector contributes about 16% of GDP. This percentage may decrease due to increase in production costs due to higher tariffs.

Pharmaceuticals and IT services: Indian pharmaceuticals and IT services may also suffer losses. Strictness in H-1B visa policies could affect these industries. Pharmaceuticals industry which is almost  Exports worth 40 billion dollars, may be affected by Trump’s policies.

6. Global Trade Balance
China-India Trade Relations: China-India trade relations may also be affected by Trump becoming President. If America takes tough action against China, it "china-plus-one" Can encourage strategy. Trade between China and India is approximately  90 billion dollars  Has reached. If companies move towards India, this trade balance may change.

7. Global supply chain
The global supply chain may also be affected due to Trump’s policies. If American companies decide to move out of China and move to India, it will lead to growth in some sectors but will also increase inflation.

8. Impact on consumers
Domestic inflation rate: Consumers may have to face an increase in inflation rate. When prices of goods rise, it directly affects the purchasing power of consumers. If the current inflation rate is around 6% and it reaches 8%, consumers will have to spend more.

Impact on the standard of living: Due to increase in the inflation rate, the standard of living will become worse. Level is also affected. Rising prices of essential commodities such as food and fuel put economic pressure on the general public.

9. Trade between India and America: Import and Export

Trade relations between India and America are continuously strengthening. Here is a list mentioning the major items that India exports and imports to the US:

Figures:
In the year 2022-23** India will surpass America in  78 billion dollars  while it exported  Imported 50 billion dollars.
Year 2024  In the first half of 2016, India defeated America  41.6 billion dollars  Which was 10% more than last year. Donald Trump becoming the President again can bring many challenges for India. Policies such as higher tariffs, substitution taxes, and potential trade wars could impact the Indian economy. Prices of everything from consumer apparel to food items are likely to rise. Therefore, Indian policy makers should develop strategies that can meet these potential challenges and provide support to domestic industries so that they can compete globally. To survive.  Thus, with Trump becoming President, there is a possibility of the prices of many things increasing which may ultimately put economic pressure on the general public.