What India Could Learn From the Complaints of Its Trade Partners

There is vast scope for productivity enhancement in the economy if we pick up the right lessons from today's trade stand-off

- INDIRA RAJARAMAN

Even before the US paused its Liberation Day tariffs for three months until July 9, it was clear that those levies would have to be periodically updated since they were based on annual (flow) data. Any country on the high-tariff list can reduce its bilateral trade surplus with the US and demand a recalibration of its tariff.

It is important to remember this, because long-term export strategies based on the comparative advantage we might temporarily enjoy vis-a-vis Malaysia or Vietnam, just because they were charged higher tariffs in the first round, could come to grief. Even China has been promised a tariff drop from 145% (the 245% number is just for one or two products for which the new levy was added on to a pre-existing 100% tariff). The promise for China is in the 50-65% range, probably in response to Chinese restrictions on the export of rare earth elements (essential in the manufacture of magnets and much else).

India and the US are working on a bilateral trade agreement (BTA). There will be an initial focus on agricultural trade, where the tariff disparity is startlingly wide, but not much more is known about the contours of the BTA other than that it will be in two phases.