Donald Trump Excludes India From New Tariff, Target China, Mexico, and Canada
In a significant move, US President Donald Trump announced the first set of tariffs on February 1, targeting China, Mexico, and Canada. The new measures impose a 25% tariff on imports from Mexico and Canada and a 10% tariff on Chinese goods. Interestingly, India was excluded from this round of trade tariffs, sparking discussions on its potential implications for bilateral trade.
Why India Was Excluded ?
India’s exclusion is largely due to its smaller contribution to the US trade deficit compared to the targeted nations. According to the Research and Information System (RIS), China, Mexico, and Canada collectively account for over 63% of the US trade deficit, with China leading at 30.2%. In contrast, India’s contribution stands at just 3.2%, ranking it ninth on the list.
While Trump has previously criticized India’s tariff policies, this decision suggests a more measured approach to US-India trade relations, with possible bilateral negotiations during Indian Prime Minister Narendra Modi’s scheduled visit to the US later this month.
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Focus on Trade Deficits and Economic Impact
The decision to impose tariffs on these three nations stems from Trump’s pledge to address America’s trade deficits and combat issues like the fentanyl crisis.
- China: Accounts for 30.2% of the US trade deficit.
- Mexico: Contributes 19% and is linked to facilitating fentanyl distribution.
- Canada: Makes up 14% and holds a $200 billion trade deficit with the US.
The Peterson Institute for International Economics estimated that a 10% tariff increase on Chinese goods, paired with Chinese retaliation, could reduce US GDP by $55 billion over four years and China’s GDP by $128 billion.
India’s Position on Tariffs
India’s import tariff policy has evolved to balance domestic objectives and global economic integration. The Economic Survey highlights India’s adherence to WTO regulations while protecting sensitive sectors and ensuring access to essential raw materials. Efforts to rationalize tariffs and resolve duty structure issues have bolstered India’s trade standing.
NITI Aayog CEO BVR Subrahmanyam has noted that Trump’s trade policies could lead to significant trade diversions, potentially benefiting India. As global commerce realigns, India could see increased opportunities for export growth.
Looking Ahead: US-India Trade Talks
India’s exclusion from the tariff list opens the door for constructive dialogue. With Modi’s upcoming US visit, discussions may focus on strengthening trade ties and addressing mutual concerns, ensuring a win-win situation for both nations.
