The Centre remains watchful over the tariff policies being announced by the US government but for now its impact seems to be largely on global trade and growth prospects.
“We are watchful…Everyone’s concerns are there on account of global trade growth and global growth, but specifically for India, nothing has been said,” finance and revenue secretary Tuhin Kanta Pandey told BT.
His comments come in the wake of US President Donald Trump announcing a 25% tariff on goods from the Canada and Mexico and an additional 10% tariff on imports from China into the US. While Trump on Tuesday announced a 30 day pause on tariff plans on Canada and Mexico, China has reacted with fresh tariffs on US exports from February 10.
Pandey noted that the rationalisation of customs duty rates was ongoing and had been announced by the Union Finance Minister in the Budget 2024-25 that was presented in July last year. “We had been doing this exercise autonomously,” he said when asked if the customs duty rejig was done with the US policies in mind.
He also noted that India’s tariffs on US imports have not been very high. “On the 13 large products from the US, you would see the important products imported from the US on industrial goods, our tariffs are within 10%,” he said, adding that with the Budget exercise, it has been brought down further.
India’s effective tariff rate is now down to 10.6%, which is close to the ASEAN level, he noted. It was initially 13%, then brought down to 11.6% in the last Budget.
The Union Budget 2025-26 has removed seven tariff rates for customs duties, leaving only eight rates now, including the zero rate, and has rationalised rates on several items.
Experts also underlined that the US import tariffs may hurt global GDP growth and increase investment risk.
“The US administration’s decision to impose 25% import tariffs on imports of goods from Canada (10% on oil and related items) and Mexico and an additional 10% import tariff on imports of goods from China will likely lead to a sharp increase in global macroeconomic uncertainty (growth, inflation), micro-level uncertainty for US companies and exporters affected by the tariffs and risk-off sentiment among global markets,” said a report by Kotak Institutional Equities. Markets will worry about the extension of such import duties to other countries, retaliation by other countries and potential earnings downgrades due to lower global growth and investment, it further said.
Nomura in a report noted that the size of these proposed tariffs dwarfs the tariffs Trump imposed in his first term. “Higher tariffs are likely to push up core inflation meaningfully, which reinforces our Fed call of no rate cuts this year,” it said. Despite the delayed implementation of tariffs on Mexico and Canada, the agency has also revised up its base case for tariffs. “Following the events of the past few days, we believe the likelihood of tariffs on Mexico and Canada in 2025 has risen,” it said.