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Donald Trump's recent threat to impose higher tariffs on automobile and pharmaceutical imports from India has seemingly failed to cause significant concern among Indian exporters. This nonchalant response stems from the understanding that any negative impact from increased tariffs would be broadly felt across the global market, rather than uniquely affecting Indian businesses. The pharmaceutical sector, for example, already holds a dominant position in the US generic drug market, supplying over 40% of generic prescriptions. Therefore, even with higher tariffs, Indian pharmaceutical companies would maintain a substantial competitive edge. This sentiment is echoed by Raja Bhanu, director general of the Pharmaceuticals Export Promotion Council, who believes that any tariff hike would equally affect competing nations. This is supported by the significant volume of pharmaceutical exports from India to the US, totaling $8.7 billion in 2023-24. The resilience demonstrated by Indian pharmaceutical companies illustrates a position of strength, built on substantial market share and established supply chains. The lack of panic suggests confidence in their ability to weather the storm of increased tariffs.
The automobile sector presents a similar picture. Sona BLW Precision Forgings, a company receiving 40% of its revenue from the US market, has expressed minimal concern. This confidence is grounded in the relatively low Indian import duty on auto components (7.5%). Even if the US introduces comparable tariffs, the overall impact on Indian auto exporters is expected to be minimal. This assessment is reinforced by the existing trade balance; India exported $6.69 billion worth of auto parts to the US in 2023-24, while importing only $1.6 billion. This disparity indicates that even in a worst-case scenario with increased tariffs, the effect on Indian auto part exporters would not be catastrophic. Furthermore, the lower import duty on auto components provides a level of protection against potential retaliatory measures. The strategic perspective taken by Indian exporters highlights their preparedness and understanding of the nuances of international trade.
However, the situation is not entirely devoid of strategic considerations. Proactive measures are being suggested to mitigate any potential negative effects. Raja Bhanu proposed that India could alleviate US concerns by removing existing tariffs on US drug formulations. This conciliatory action could potentially deter retaliatory measures from Washington. Moreover, the ongoing negotiations for a comprehensive trade agreement between India and the US offer a significant safety net. The successful finalization of this trade deal, anticipated within the year, would act as a crucial safeguard, potentially mitigating the impact of any imposed tariffs and establishing a more stable and predictable trading environment. This dual approach—combining a confident assessment of market strength with strategic preemptive actions—characterizes the Indian response to Trump's tariff threats. The pursuit of a bilateral trade agreement underscores a proactive strategy aimed at long-term trade stability and reducing reliance on short-term reactive measures.
In conclusion, while Trump's tariff threats undoubtedly carry potential risks, the overall response from Indian exporters reflects a calculated confidence. The belief that any adverse effects will be broadly distributed across the global market, coupled with proactive measures such as tariff adjustments and ongoing trade negotiations, effectively dampens the sense of impending crisis. The strength of the Indian market position in both pharmaceuticals and auto components, coupled with the existing trade imbalances, provides a substantial buffer against the negative impacts of increased tariffs. While uncertainty always remains in international trade, the relative calm amongst Indian exporters highlights a pragmatic and strategically sound response to this recent trade challenge.
Source: Indian exporters aren't losing sleep over Donald Trump's tariff threat. Here's why