The apprehension over the possible new tariff rate to be imposed by the USA on our imports had created quite a bit of turbulence in the markets. The rupee had fallen since July 28, as had the stock market, as they turned jittery over the prospects. The announcement did finally come on the 30th, with the US announcing a 25% tariff on Indian goods with an additional penalty for dealing with Russia. The latter has not yet been specified and would be open as of now. What does all this mean for us?

The 25% tariff rate is marginally lower than the 26% rate announced in April, and it should be remembered that there has been no deal with the USA as of the present. Where deals have been signed, as with the EU, the UK, and Japan, the rates have come down to the 10-15% range. It does look like that when the Indian government is able to strike a deal with the USA, this rate could also come down to a similar range. However, for the present, the 25% rate would hold.

The USA is our major export partner, accounting for between 15% and 20% of the total export, and hence, any change in the demand matrix will affect them. This is more so considering that Indonesia, Vietnam, and Korea have gotten away with lower rates of 19-20%. The question will be as to how our exporters respond to this challenge if the competing country is able to sell cheaper because of the cost factor. There will, hence, be some........

© Free Press Journal