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BUSINESS & TRADE MAY 02, 2025 | The Indian Eye 36

GLOBAL TARIFF WAR

Opportunity or caution: Mixed signals and views

as India and US make progress on trade deal

GTRI says that exporters eyeing new opportunities in the US market amid high tariffs

of up to 245 per cent on China must proceed with caution

OUR BUREAU US Customs checks whether a
product has truly changed during
New Delhi/New York
manufacturing. If not, even goods
mid the growing global tariff assembled outside China can still be
war, the US Trade Representa- taxed like Chinese products.
Ative (USTR) has said that the To benefit from the tariff gap-
ongoing engagement between India -where most other countries face
and the United States for a bilateral only a 10 per cent duty-- the report
trade agreement (BTA) could create mentioned that the exporters must
new opportunities for workers, farm- ensure that their products undergo
ers, and entrepreneurs in both coun- “substantial transformation.”
tries. Jamieson Greer, U.S. Trade GTRI also added that this means
Representative, welcomed the joint real value addition, such as integra-
statement made by U.S. Vice Presi- tion, design, or programming. Ba-
dent Vance and Indian Prime Minis- sic assembly or repackaging is not
ter Narendra Modi. enough. It said, “Simply assembling
Greer said “These ongoing talks China, meanwhile, is cementing its manufacturing dominance (32 per cent of global output) goods is not enough--true manufac-
will help achieve balance and reci- turing transformation must occur”.
procity by opening new markets for and has retaliated with rare earth export curbs (Agency file photo) The most sustainable model, ac-
American goods and addressing un- cording to GTRI, is to build manu-
fair practices that harm American launched by President Donald Trump high as 245 per cent, while most oth- facturing hubs outside China. Coun-
workers. India’s constructive engage- and Prime Minister Narendra Modi er countries continue to enjoy just 10 tries like India, Vietnam, Mexico,
ment so far has been welcomed and I during Modi’s visit to Washington on per cent duties, this sharp tariff gap and others are seeing interest from
look forward to creating new oppor- February 13, 2025. Ambassador Greer as a major disruptor of global trade global companies looking to shift
tunities for workers, farmers, and en- confirmed that the USTR and India’s flows. This disruption is prompting supply chains. These shifts are espe-
trepreneurs in both countries”. Ministry of Commerce and Industry companies to rethink sourcing strate- cially strong in sectors like garments,
The two leaders reaffirmed the have finalized the Terms of Reference gies, giving rise to three distinct trade pharmaceuticals, toys, electronics,
importance of the India-U.S. COM- (TOR) to guide the BTA negotiations. models, each with different implica- and chemicals.
PACT -- Catalysing Opportunities But a new report by the Global tions for exporters”. The report concluded that the
for Military Partnership, Accelerated Trade Research Initiative (GTRI) says The report highlighted that sim- export opportunity is real and signifi-
Commerce & Technology -- and ap- that exporters eyeing new opportuni- ply rerouting Chinese goods through cant--but shortcuts won’t work. Long-
preciated the progress made in the ties in the US market amid high tariffs countries like India or Vietnam to term gains will come only to those
negotiations for a Bilateral Trade of up to 245 per cent on China must avoid tariffs is risky and illegal. Such who invest in genuine manufactur-
Agreement (BTA). proceed with caution. The report said practices violate US sourcing rules ing, understand U.S. rules, and build
These negotiations were “With Chinese exports facing tariffs as and can lead to heavy penalties. transparent, compliant supply chains.

US is losing economic leverage to China: Jefferies

merican multinational investment bank cent of GDP), while household savings were only investigation into semiconductors, have only in-
and financial services company Jefferies 4.3 per cent of disposable income, far below Chi- creased investor uncertainty.
Ahas raised concerns about the shifting na’s 31.8 per cent. The report argued that Trump’s tariffs have
global economic power balance and the dimin- It stated, “A major problem for Donald Trump, hurt domestic business sentiment and consumer
ishing financial leverage of the United States as it would be for any US president, is simply that confidence, pushing the Atlanta Fed to forecast
under President Donald Trump, primarily due to China has the savings, whereas America does not.” a 1Q25 GDP contraction of 2.2 per cent.
ongoing tariff policy issues. The report also noted that a sharp sell-off in both China, meanwhile, is cementing its manu-
The core concern highlighted in the report the US dollar and Treasury bonds during recent risk- facturing dominance (32 per cent of global out-
is America’s eroding economic exceptionalism, off market moves has raised concerns about the sus- put) and has retaliated with rare earth export
driven by its massive net international invest- tainability of the dollar’s reserve currency status--a curbs--key to U.S. defense systems. The EU’s
ment deficit and chronic under-saving compared pillar of the United States’ financial dominance. warming ties with Beijing, including talks on
to China. As of end-2024, the U.S. net IIP stood Trump’s erratic tariff policy reversals, such as EV tariffs, hint at growing divergence from U.S.
at a record deficit of USD 26.2 trillion (89.9 per temporary exemptions on electronics and a fresh trade strategy.

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