Trump Reciprocal Tariff Can Cut India GDP by 0.6%: Report
PM Narendra Modi, US President Donald Trump, Japan PM Shigeru Ishiba Image credit X.com
NATIXIS Report States India May Marginally Gain from Trade War
By Raisina Correspondent
New Delhi, March 12: Should India take no steps against threat of reciprocal tariffs, the GDP will take a marginal hit, said a Vietnam-based agency. It argued that China can take a hit of 1.2 per cent of the GDP due to tariff measures of the US.
India and the US are holding negotiations for bilateral trade agreement. US President Donald Trump has so far announced tariffs against imports from China, Mexico, and Canada. From April 2, Trump has vowed to impose reciprocal tariffs.
Economic analysts Trinh Nguyen, Benito Berber, and Nnna Mufteeva in their paper for NATIXIS said: “Should India not lower US tariffs and Trump goes ahead with reciprocal tariffs, we expect this to have minus 0.6% of GDP impact on India.”
They argued that “India, despite having low export as a share of GDP, stands out vulnerable to reciprocal tariffs and pharmaceutical tariffs. The good news for India is that it is trying hard to avoid it and can lower tariffs to match with US or get other concessions”.
“This hits India at a vulnerable moment when it has slowing domestic demand. We think the RBI will continue to cut rates to support slowing growth. Meanwhile, the government will be more aggressive in diversifying investment and trade, such as negotiating for the EU-FTA, to mitigate the fallout of US tariffs,” the added in the report.
The paper also stated that if Trump tariff remains aimed at China only then the Communist country may lose 1.2 per cent of its GDP. The paper also warned that Indonesia and Vietnam face major risks due to reciprocal tariffs. Indonesian economy is already shrinking, as seen in squeezing of its middle class.
The paper argued that ASEAN members and India may gain from the aftereffects of “China only” tariff measures of the US. But it stressed that gains for India will be limited due to lack in focus on labour intensive manufacturing sector.
“For each corresponding decline in Chinese dependency, ASEAN has gained the most. The EU also has gained substantially. India has gained across the board but not as much as the ASEAN region. For apparel, India lost share to the US,” said the paper.
It stated that “ASEAN has gained across all categories of export to the US, driven by mostly Vietnam, Thailand and Malaysia. India will also attract more FDI but likely in ICT sector as it prioritizes it and less so in labour intensive”.
The paper also stated that “for many Asian economies, China retaliation on US agriculture products can also be beneficiary such as big producers such as Thailand, Vietnam, India and Australia”.
“We expect Vietnam, along with Malaysia and Thailand to continue to be key beneficiaries to US-China tensions. India, too, will raise its trade with the world but at a much lower level than Vietnam due to less policy emphasis to remove hurdles to doing business and only emphasis on ICT and neglecting labor-intensive manufacturing,” added the paper.
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