India has decided to impose tariffs on U.S. imports. These include a 150% tariff on drinks from the United States and a 100% tariff on different farm products. This is believed by many to be a reaction to Washington’s recent trade actions to protect American firms, and it may contribute to the further worsening of the economic relationship between the two countries.
India’s Retaliatory Strike
The Indian government’s action is timed as tensions are rising in trade, with both countries trading blows in recent years on tariffs and access to markets. The fresh curbs are on high-value US exports like premium whiskey, bourbon, wine, and farm products like apples, almonds, and pulses.
India, a substantial importer of U.S. beverages, says the increase in tariffs is needed in response to fresh U.S. trade barriers imposed on Indian imports like steel, drugs, and IT services. The action will target U.S. liquor makers that depend on India’s burgeoning middle class and fast-growing market for luxury goods.
Washington’s Reaction
The Biden administration is not pleased with India’s action. U.S. Trade Representative Katherine Tai said the tariffs are “too high and not fair.” She further said Washington is considering its trade policies and may take action if needed.
“The United States has long pursued a reciprocal and open trade relationship with India. The recent tariff increase will only hurt businesses and consumers on both sides,” Tai said.
Some of the farm organizations within the United States are concerned, primarily apple and almond farmers, who heavily depend on the Indian market. The U.S. Apple Association estimated the loss of exports to India of over 60% in the event of the imposition of a 100% tariff, losing American growers hundreds of millions of dollars.
Impact on Consumers and Businesses
For Indian consumers, the heavy duty on American beverages may raise the prices by leaps and bounds, making foreign beverages unaffordable for the masses. Indian traders and importers are concerned with a sudden dip in sales and thus resort to other nations such as the United Kingdom and Japan.
Indian importers of US almonds and apples seek alternatives in agriculture. This would be beneficial for local farmers and exporters from countries such as Australia and Chile. Some Indian business lobbies have warned, however, that increased taxation of imports would drive prices up in the food and beverages sector.
What’s Next?
Trade analysts feel that the trade war between America and India is starting, as both nations are not willing to back down. While some of them feel that the conflict can be settled through negotiation, others are apprehensive that the tensions may result in more controls and retaliatory actions.
India and America share a strong trade partnership, with their trade reaching more than $191 billion in 2023. However, protectionism and retaliatory tariffs have the power to shatter this partnership, hurting business people and consumers on both sides.
As things develop, everyone will watch to see if India and the U.S. can agree on trade talks or if the disagreement will turn into a major economic conflict.
