More tariffs on the way – Learn to become self-sufficient

Every day, we hear news of fresh and increased tariffs on US imports. Last Wednesday, Donald Trump imposed an additional 25 percent tariff on Indian imports, bringing the total to 50 percent. 

Speaking to The Times of Oman, R. Madhusoodanan, a financial expert based in Muscat, said, “This is nothing but a retaliatory action” by the US, citing that India continued to purchase of Russian crude.

This is quite discriminatory as China is importing more crude from Russia than India, and still, their tariff is much lower than that of India. 
No doubt, if implemented, India’s exports to the US, particularly textiles, pharma,  vehicle parts, leather, and marine products, are expected to be impacted at least in the short term. 

For example, the current tariff on steel, copper, and aluminium is 1.7 percent, while the revised rate will be 51.7 percent, whereas the tariff applicable to Mexico , China, and Canada is 25 percent, 30 percent, and 35 percent, respectively.

This makes the Indian products costly for the US customers.

‘Unfair, unjustified, and unreasonable’
The Indian government has said the move is “unfair, unjustified, and unreasonable.

The government has been taking steps to diversify the export markets to other regions, including South American countries, to mitigate the potential risks. More credit flow is expected to happen to sectors like agriculture, manufacturing, pharma, housing, and textiles.
New markets, infrastructure, tariffs on imports, export incentives, and tax sops are also very important, besides making available cheap, timely, and adequate finance to these sectors.

Currently, India has around 18 percent of its exports to the US, and India has a trade surplus with US.   New developments may impact the trade deficit of India. The shocks in the Indian equities, weaker INR, and high volatility in the forex markets are indicators., he further said.
It is high time that India became self-sufficient in many areas and to have checks on the import of electronic goods, gold, and other precious metals to preserve forex earnings.

Efforts also needed to produce goods and services that are globally competitive.

Outlook
The new tariffs on more than 90 countries around the world have come into effect. But the fact is that the US is also not insulated from the aftermath of the tariff decisions.

The latest payroll data released is not good.

The dollar index (DIX), which indicates the strength of the dollar against a basket of currencies, is in the range of 98-99.

Inflation and growth concerns are also factors facing the US economy.

The US is well aware of the consequences of its exports and  the higher inflation, etc, due to the increased tariffs. US kept the windows open for discussion with many countries, including that of India, and the new rates are unlikely to be the final ones, R. Madhusoodanan said.