Unresolved Crisis

As India prepares to cut tariffs ahead of a crucial meeting between Prime Minister Narendra Modi and US President Donald Trump, the move signals a calculated attempt to maintain trade stability while avoiding retaliatory measures.

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With the US administration pushing for reciprocal tariffs and considering steep duties on steel and aluminum imports, India's pre-emptive tariff reductions in select sectors could be a strategic maneuver to keep economic ties intact. However, the broader implications of such concessions need closer scrutiny. India's economic policies have traditionally aimed at balancing domestic industry protection with global trade integration.

The tariff reductions – targeting electronics, medical and surgical equipment, and chemicals – suggest a willingness to accommodate US demands while aligning with India's own production and consumption patterns. This approach may seem pragmatic, given the rising tensions in global trade, but the risk of over-accommodation remains. Concessions on items where India has strong domestic producers or potential for self-sufficiency could undermine long-term industrial growth. One of the key concerns is the impact on India's steel and aluminum exports. The Trump administration's move to impose a 25 per cent tariff on these metals could significantly affect Indian engineering goods, a sector that contributes substantially to overall exports. While India's diplomatic engagement may help mitigate some of the harshest trade measures, there is no guarantee of exemption.