Don't leap into RCEP: Let Trump's tariff game play out

India's response must be clear about what has changed under Trump and what conditions are likely to endure

- Manoj Pant

Indian exporters now face an additional 50% duty on exports to the US on top of earlier tariffs. Half of this is a penalty imposed by Washington for India's oil trade with Russia. Under Section 232 of the US Trade Expansion Act of 1962, tariffs can be raised on national security grounds, though strategic exemptions apply to some products. Indian exports of textiles, leather goods, gems and jewellery and other items now stare at tariffs of around 60%. As some of these sectors have as much as half their output exposed to the US, many businesses will not survive. True, these exports enjoyed a temporary boom as US buyers made preemptive purchases ahead of the tariff deadline, but that respite is short-lived. Already, advance orders are drying up.

For the US, such tariffs are self-defeating. Optimistic forecasts suggest tariff revenues of $2.1 trillion over the next decade, but that pales beside the $4.5 trillion budget gap created by US President Donald Trump's tax cuts, leaving the fiscal deficit set to swell by $3 trillion. The market for Treasury bonds will feel the pressure, debt levels will rise and long-term stability will suffer (as has happened before). Trump's promise of a manufacturing revival collides with a labour shortage of his own making. His hard line on immigration has deprived farms and small businesses of workers, forcing his administration to quietly relax enforcement. In high-skill sectors, hiring has stagnated as companies turn to AI-driven productivity.