Global context: How others responded
Several US trading partners have concluded negotiations to secure adjusted tariff rates and maintain market access. The European Union reached an agreement involving a 15% tariff lower than initially proposed alongside commitments to increase purchases of US energy and defence products. Japan agreed to similar tariff terms, coupled with substantial investment pledges in the US to maintain access for its automotive and electronics sectors.
South Korea successfully safeguarded its car and semiconductor industries from the highest tariff bands but accepted revised terms for steel and metals. Indonesia negotiated a 19% tariff while gaining removal of certain US trade barriers affecting its agricultural and energy exports. Vietnam, however, faced a 20% tariff on several goods and a 40% rate on transhipped products, primarily of Chinese origin.
India’s position
India, despite having been among the first to pursue a free trade agreement with the US, currently faces the full impact of the announced 25% tariff and the potential additional penalty. This affects approximately USD 87 billion worth of exports, with sectors such as textiles, leather, jewellery, and seafood likely to experience the most immediate impact.
Industry observers note that without negotiated adjustments, Indian exporters could face competitive disadvantages compared to peers from countries that have secured preferential terms. This could influence sectoral growth rates and market positioning in the short term.
Potential policy directions
India’s response may include enhanced engagement with the US to explore scope for tariff relief or phased implementation. Concurrently, accelerating trade negotiations with other partners including the EU, Canada, and Gulf economies can help broaden market access and reduce overreliance on specific geographies.
In the energy sector, recalibrating the oil import strategy from Russia may be considered, given the narrowing price differential currently around USD 4.5–5 per barrel compared with Middle Eastern grades. This could support a balanced approach to both economic and strategic considerations.
India may also assess the options available under international trade frameworks. While proceedings at the World Trade Organization can be lengthy, pursuing such avenues may reinforce India’s commitment to a rules-based trade order.
Domestic measures for export resilience
In parallel, domestic measures could focus on:
- Streamlining export-related procedures and expediting tax refunds
- Providing targeted credit support and incentives for affected industries
- Enhancing export infrastructure and logistics capabilities
- Supporting Indian brand development in global markets
- Promoting trade settlement in local currencies where feasible
Looking ahead
The current situation underscores the need for continuous policy adaptation in response to evolving global trade dynamics. By combining strategic diplomacy, market diversification, and domestic competitiveness measures, India can strengthen its position in the global value chain. The months ahead will be important for aligning short-term responses with long-term trade and economic objectives.
(The authors Agneshwar Sen is Trade Policy Leader at EY India and Anant Swarup is Former Additional Secretary, Department of Commerce, Govt of India)
