Commerce Ministry Drafts Plan to Counter 50% US Tariffs on Indian Goods
India's Commerce Ministry is developing a multi-tiered strategy to protect exporters from new 50% US tariffs, which could affect nearly $49 billion worth of shipments. The plan includes short-term measures for liquidity relief, medium-term actions to leverage existing free trade agreements (FTAs) with partners like the EU and UAE, and a long-term goal of diversifying export markets to Latin America and Africa. The strategy aims to build supply chain resilience and reduce compliance burdens for businesses, particularly MSMEs.
Unpacked:
The US imposed the tariffs amid growing diplomatic tensions over India's continued imports of Russian oil, which the US deemed contrary to its sanctions policy, despite India citing energy security needs for its large population. This marks a significant shift from previous US positions that were more accommodating of India's stance.
The US is one of India’s largest export markets, with up to 70% of India’s exports to the US now at risk due to the tariffs. The affected exports are valued at nearly $49 billion, making the situation highly consequential for Indian businesses and the broader economy.
Indian officials have criticized the tariffs as unjustified, highlighting inconsistencies in US policy and emphasizing India’s need for affordable energy. Industry groups like ICRIER have called for urgent export diversification and trade reforms to reduce reliance on the US market.
MSMEs (Micro, Small, and Medium Enterprises), which form a significant portion of exporters, could suffer from reduced orders, cash flow issues, and increased compliance burdens. The government’s strategy includes liquidity relief, leveraging FTAs, and market diversification to help these businesses remain resilient.