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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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