US Tariffs on Indian Goods Hit 50%: Calls for Targeted Fiscal Support for SMEs

The recent increase in US tariffs on Indian imports has sparked concerns about the impact on India's small and medium-sized enterprises (SMEs), with experts calling for targeted fiscal support to help these businesses weather the storm.

Tariff Hike and Its Impact

Ashok Malik, a partner at The Asia Group, has highlighted the pressing need for India to provide targeted fiscal support to its small and medium-sized businesses. This comes in the wake of a significant increase in US tariffs on Indian imports, which rose by an additional 25% on August 27, bringing the total tariff rate to 50%.

The sectors most affected by these tariff hikes include:

• Gems and jewellery
• Leather goods
• Textiles

These industries, which form a crucial part of India's export basket, are now facing heightened challenges in maintaining their competitiveness in the US market.

Trade Diversification and Geopolitical Factors

While acknowledging that the United States remains a critical consumption hub for India, Malik emphasized the importance of trade diversification. He suggested that India should actively pursue trade deals with:

• The United Kingdom
• The European Union
• ASEAN countries

This strategy could help mitigate the impact of the US tariffs and reduce India's dependence on a single market.

Malik also offered insights into the potential motivations behind the tariff increase. He suggested that the tariffs might be linked to India's purchase of Russian oil and could be serving as pressure tactics in ongoing trade negotiations, rather than genuine efforts to address the Russia-Ukraine conflict.

Trade Deal Complications

Despite what Malik described as an "impressive trade deal" offered by India, which included broader market access, he believes it's being rejected for geopolitical reasons rather than on its own merits. This situation underscores the complex interplay between trade and geopolitics in the current global landscape.

Looking Ahead

Malik predicts challenging months ahead for both India and the United States in terms of their trade relationship. He indicated that any de-escalation would likely require the first move to come from Washington.

As Indian businesses, particularly SMEs, grapple with the impact of these increased tariffs, the call for targeted fiscal support highlights the need for proactive measures to sustain these vital sectors of the Indian economy. The situation also underscores the importance of diversifying trade relationships and navigating the intricate web of global trade dynamics in an increasingly complex geopolitical environment.