Proactive protection lacking, US tariffs will hurt MSMEs

Indian exports to the US now face 50% tariffs. No other country in Asia has tariffs this high. Many leaders of the ruling dispensation have attempted to downplay the impact of these tariffs on Indian businesses by stating that India is a domestic consumption-led economy and that Trump's tariffs will not have a significant impact domestically. However, the reality could be very different.

- Sachin Pilot

The immediate impact can be gauged from the stock market, where benchmark indices closed August in the red. This is part of an overall sentiment of under-confidence, which was also demonstrated in the massive outflows by Foreign Institutional Investors (Flls), who have preferred other emerging markets.

In terms of the direct impact on trade, the tariffs affect about two-thirds of India’s $86.5 billion annual exports to the US (impacting close to $60 billion worth of exports). Labour-intensive industries such as textiles, apparel, gems and jewellery, seafood, and leather will be impacted significantly, creating further stress on the already extremely grim employment levels. Even by the most forgiving estimates (which mask underemployment and exaggerate insecure temporary livelihoods), 18% young urban (qualified) Indians are without work; the number is significantly higher in rural areas. The hit of Trump's tariffs on labour-intensive sectors is only going to hurt India’s youth more.