Source: The post Implications of tariff measures and way forward for India
has been created, based on the article “Countering the tariff” published in “The Indian Express” on 28th August 2025. Implications of tariff measures and way forward for India.
UPSC Syllabus Topic: GS Paper 3- Indian Economy and issues relating to Planning, Mobilisation of Resources, Growth, Development and Employment.
Context: The US recently imposed “secondary tariffs” of 25% on certain Indian products, in addition to earlier 25% “reciprocal tariffs,” affecting sectors like pharmaceuticals, mobile phones, semiconductors, and chemicals.
Implications for India
- Economic Impact: Nearly 55% of India’s $89 billion exports to the US face higher tariffs, especially in pharmaceuticals, engineering goods, textiles, and gems & jewellery.
- Trade Diversion: US tariffs make Indian goods less competitive; exports may be diverted to South and Southeast Asia, which already enjoy lower tariff regimes.
- Agriculture & Food Security: Tariffs on soya, dairy, and other agricultural products affect farmers and rural livelihoods.
- Energy Security: With the US halting Russian oil imports, India may face difficulties if energy trade routes are restricted further.
- Diplomatic Strain: Such unilateral actions undermine trust in bilateral negotiations (e.g., stalled US–India bilateral trade deal of $500 billion target).
WTO & Global Trade Concerns
- Violation of WTO binding commitments and the MFN principle and raise questions about the future of global trade rules.
- Weakening of the WTO’s dispute resolution system (Appellate Body non-functional since 2019).
- Sets a precedent for other countries to bypass multilateral rules through unilateral tariffs.
Way Forward for India
- Diversification of Export Basket: Focus on new destinations in Africa, Latin America, ASEAN, and the EU to reduce dependence on the US.
- Strengthen FTAs: Expedite trade agreements with the EU, UK, and Australia to hedge against US trade unpredictability.
- WTO Reform Push: Work with like-minded countries to restore WTO dispute settlement mechanism.
- Domestic Competitiveness: Improve logistics, lower production costs, and support labour-intensive industries (textiles, leather, handicrafts).
- Strategic Autonomy: Balance relations with major powers while safeguarding national economic interests (e.g., continuing imports of Russian energy).
Question: The recent US tariffs on Indian goods have raised concerns about WTO commitments and India’s export strategy. Discuss the implications of such tariff measures and suggest a way forward for India.
