Trump's tariff threats

 Trump's tariff threats may be good for India: Ex-RBI deputy Viral Acharya

Acharya, who was a deputy governor at the RBI between 2017 and 2019, said large firms that had benefited from the protectionist measures will initially lose some value, but the economy will benefit

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Workers walk past shipping containers stacked at Adani Ports and Special Economic Zone Ltd | Photo: Bloomberg

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4 min read Last Updated : Mar 10 2025 | 7:39 AM IST

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By Anup Roy

 

US President Donald Trump’s threats to hike tariffs isn’t all bad news for India’s economy since it’s driving the government to lower trade barriers, which will spur competition and growth.

 

That’s the view of Viral Acharya, a former central bank deputy governor, who says greater competition means Indian firms will be forced to raise their standards to take on global rivals. That, in turn, means higher quality jobs and a larger manufacturing base, he said. 

 

Trump has threatened to impose reciprocal tariffs on countries from April 2, effectively raising taxes on imports to the US to the same level that a trading partner imposes on American goods. Economists estimate that India would be one of the worst hit by the reciprocal tariffs given the wide differential of about 10 percentage points in average import duties between the two countries. 

 

 

India’s government has already taken steps to ease tariffs, making significant cuts in February, and discussing reducing import taxes on US goods ranging from cars to chemicals and electronics. 

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Commerce Minister Piyush Goyal was in the US last week to hold talks with his US counterpart Howard Lutnick and other Trump officials on a multi-sector trade deal. The US president said Friday India was ready to make deeper tariff cuts. 

 

Acharya, who was a deputy governor at the Reserve Bank of India between 2017 and 2019, said large Indian firms that had benefited from the protectionist measures will initially lose some value, but the economy will benefit overall. 

 

“In a competitive market, companies should not be making fat margins unless they are the most efficient provider of that service or good,” he said.

 

Indian businesses, not just the big firms, are capable of competing with the best globally but that will require investments in efficiency and productivity, he said.

 

“Unless we subject them to this competition, we will never see their best,” he added. 

 

‘Big five’ firms

 

Acharya, now director of doctoral education at NYU Stern School of Business, has previously argued for breaking up India’s biggest conglomerates. In a paper in March 2023, he said India’s “Big 5” firms — Reliance Group, Tata Group, Aditya Birla Group, Adani Group and Bharti Telecom Ltd. — had grown at the expense of smaller local firms, while the government’s “sky-high tariffs” have shielded them from competition from foreign firms. 

 

Indian firms are “smart enough to innovate if they are put under pressure. And they will regain some of their mojo thereafter,” Acharya said in the interview.

 

Opening the economy to foreign firms may not just result in direct competition, but “it may lead to substantial knowledge transfer as strategic partnerships are formed with foreign players,” he said. “Eventually, some global giants will emerge from that process.”

 

To minimise the impact on Indian industries, Acharya suggested lowering tariffs in phases with clear communication about the end goal. If the policy path is predictable, businesses will invest in efficiency, innovation, and focus on upskilling their workers, he said. 

 

Prime Minister Narendra Modi earlier this week urged Indian businesses to take advantage of the changing global landscape to invest more, calling it a “big opportunity” for them.

 

Although governments use protectionist measures to support their domestic industries and workers, Acharya said concerns about job losses if trade barriers are taken down are not backed by evidence. 

 

“There is no evidence that when we opened up in the 1990s, we killed jobs,” he said. “It was not true in the nineties, it was not true in the 2000s.” 

 

Instead, greater competition will boost private capital spending and productivity, and spur growth. It will also result in more higher-skilled jobs and raise domestic consumption.

 

“And that is the transformational change India needs at the moment,” he said. “It is just a version of what worked for us in the 1990s and 2000s.”

India willing to reduce tariffs further to woo US

By

Zia Haq

, New Delhi

Mar 10, 2025 06:04 AM IST

Indian negotiators have expressed willingness to make deeper tariff cuts, including zero duty on some agricultural products, to help boost US-India trade to $500 billion by 2030

Indian negotiators have expressed willingness to make deeper tariff cuts, including zero duty on some agricultural products, to help boost US-India trade to $500 billion by 2030, a goal set during Prime Minister Narendra Modi’s summit with US President Donald Trump earlier this month, trade experts and officials advising the government have said, requesting anonymity.

US President Donald Trump and Prime Minister Narendra Modi during a joint press conference in the East Room of the White House in Washington DC on February 13, 2025. ( (AFP)

US President Donald Trump and Prime Minister Narendra Modi during a joint press conference in the East Room of the White House in Washington DC on February 13, 2025. ( (AFP)

To ward off a potential trade war, the Indian side has signalled wide-ranging cuts in imports of cars, chemicals, electronics, pharmaceuticals and medical devices for a multi-sector bilateral trade with the US, an official with knowledge of the matter said on Sunday.

A team in Washington, led by commerce minister Piyush Goyal, is also trying to counter a negative perception among the Americans that India is a high-tariff nation, by citing recent examples of several changes in tariffs, a second official said.

These include decisions to pare tariff on high-end motorcycles to 100% from 110% and on American bourbon whiskey to 30% from 50% earlier.

The Indian side has signalled willingness to have a zero-duty framework on imports of specific quantities of lentils and peas, the first official said.

The Indian side has also cited to the Americans trade data that shows India levies an average of only 3% duty on over two-dozen items US exports to India, with high tariffs limited to a few goods — part of a broader attempt to change the narrative that India penalises American businesses.

Commerce minister Piyush Goyal is in Washington to negotiate a deal to ease trade tensions, weeks ahead of President Trump’s reciprocal tariffs on India taking effect early next month.

For leverage, India has highlighted areas in which the US enjoys trade surpluses with significant exports to Asia’s third largest economy, where India could ramp up import taxes, the second official said.

A strategic stance on stiffening tariffs in these sectors would allow India negotiating leverage, said Sachin Chaturvedi, the head of Research and Information System for Developing Countries or RIS. Chaturvedi leads one of the trade experts’ groups advising the government.

The country depends on net import of pulses and it already has an agreement with Australia for import of fixed quantities of lentils on zero duty. “A similar agreement with the US is on the table. Overall, our aim is to ease tariff and non-tariff barriers to such an extent that by 2030, bilateral trade reaches $500 billion,” the first official trade said.

Generally, India remains reluctant to open up the sensitive agriculture sector because millions of small farmers depend on it.

In remarks made on the US economy, Trump on Friday said in Washington that India had signaled readiness to make substantial tariffs cuts than before. “They’ve agreed, by the way, they want to cut their tariffs way down now,” Trump said.

Analysts say India’s higher tariff rate and a $41 billion trade surplus with the US puts it among the most vulnerable nations if Trump follows through with tit-for-tat tariffs.

An average hike of 15%-20% in the US’s tariffs could reduce India’s overall exports by 3-3.5%, according to a note by State Bank of India.

Advisers to the government are also brainstorming on steps to prevent cheap influx of Chinese goods, a trade tactic known as dumping, as a result of proposed lower Indian tariffs.

Agriculture cannot be off-limits and India must open up its farm sector, US commerce secretary Howard Lutnick told the India Today TV channel via video on March 7.

India has long protected the farm sector to shield cultivators from cheaper imports. Lutnick suggested that sensitive sectors can have quotas on imports.

“Maybe certain products have quotas. Maybe certain products have limits...And then we do the same thing on the other side and craft an agreement that makes sense for both of us,” Lutnick said.

“The Indian agriculture market has to open up. It can’t just stay closed,” he added. Lutnick said India must ramp up defence and energy imports from the US.

Donald Trump walks back on his tariff threat as markets tank, industry pushes back: Why his tariff plan is unsustainable

A study by economists at the Massachusetts Institute of Technology, Harvard University, the University of Zurich and the World Bank concluded that Trump’s tariffs in his last term neither raised or lowered US employment.

Written by Anil Sasi 

President Donald Trump addresses a joint session of Congress at the Capitol in Washington on TuesdayPresident Donald Trump addresses a joint session of Congress at the Capitol in Washington on Tuesday. (Photo: AP)

For the second time in less than 48-hours, US President Donald Trump rolled back the newly imposed taxes on imports from Canada and Mexico by signing orders significantly expanding the goods exempted from duties slapped on America’s two biggest trade partners. Earlier, on Wednesday, Trump said he would temporarily exempt carmakers from 25 per cent import taxes just a day after they came into effect.

The trade war tensions have roiled markets, with the leading US stock indexes all ending lower in Thursday’s trade. In signing the new orders, Trump denied the suggestion that he was walking back the measures because of concerns about the stock market. “Nothing to do with the market,” Trump said. “I’m not even looking at the market, because long term, the United States will be very strong with what’s happening.”

Donald Trump has frequently used tariffs as a tool in trade policy, arguing that they protect American jobs and industries. As he campaigns for the 2024 U.S. presidential election, he has once again threatened new tariffs, potentially as high as 60% on Chinese imports and broader global tariff hikes. This could have significant global repercussions, including for India.

Pros of Trump’s Tariff Threats

1. Protection for Domestic Industries – Higher tariffs on imports, especially from China, may help American manufacturers by making foreign goods less competitive.
2. Trade Negotiation Leverage – Tariff threats can be used as a bargaining tool to push other countries into trade agreements more favorable to the U.S.
3. Diversification of Global Supply Chains – Companies looking to avoid U.S.-China trade tensions may shift manufacturing to other countries, including India, Vietnam, and Mexico.
4. Potential Boost for Indian Exports – If Chinese goods become costlier due to tariffs, Indian manufacturers could gain a larger share in the U.S. market, especially in textiles, pharmaceuticals, and IT services.

Cons of Trump’s Tariff Threats

1. Increased Global Trade Uncertainty – Tariffs can trigger retaliatory measures from other countries, leading to trade wars that disrupt global economic stability.
2. Higher Costs for U.S. Consumers – Tariffs often lead to increased prices for imported goods, affecting consumers and businesses in the U.S.
3. Economic Slowdown Risks – If global trade declines due to tariffs, it could slow down economic growth, impacting developing countries like India.
4. Impact on Indian IT and Services Sector – If Trump targets outsourcing or increases restrictions on H-1B visas, India’s IT sector could suffer, as the U.S. is its largest market.

Impact on India

1. Potential Opportunities in Manufacturing – If U.S. firms look for alternatives to China, India could benefit if it improves ease of doing business.
2. Pressure on India to Align with U.S. Policies – India might face demands from the U.S. to impose restrictions on Chinese imports or change its trade policies.
3. Uncertainty in U.S.-India Trade Relations – If Trump extends tariff policies beyond China, Indian exports to the U.S. (such as steel and textiles) could be affected.
4. Market Volatility – Financial markets in India may react negatively to global trade tensions, impacting investments and economic confidence.

Conclusion

While Trump’s tariff threats could create opportunities for India in manufacturing and exports, they also pose risks of economic instability and trade friction. India must navigate these challenges by strengthening domestic industries, diversifying trade partners, and enhancing diplomatic negotiations with the U.S.