{"id":5185,"date":"2024-12-13T10:55:52","date_gmt":"2024-12-13T10:55:52","guid":{"rendered":"https:\/\/www.paytmmoney.com\/blog\/?p=5185"},"modified":"2024-12-13T10:55:52","modified_gmt":"2024-12-13T10:55:52","slug":"tariffs-tensions-and-triumphs-indias-path-amid-global-upheaval","status":"publish","type":"post","link":"https:\/\/www.paytmmoney.com\/blog\/tariffs-tensions-and-triumphs-indias-path-amid-global-upheaval\/","title":{"rendered":"Tariffs, Tensions, and Triumphs: India\u2019s Path Amid Global Upheaval"},"content":{"rendered":"

A Historical Echo: The Domino Effect of Trade Wars<\/b><\/h2>\n

The year was 1930 when the Smoot-Hawley Tariff Act triggered a global trade war, deepening the Great Depression. <\/span>The act raised import duties on more than 20,000 goods, including agricultural imports, by about 20%.<\/span> Fast forward to 2025, and history seems to rhyme. With Donald Trump back in the Oval Office, his administration has reignited tariff battles, this time aimed at China and a host of other global players. As the world’s two largest economies spar, India finds itself both at risk and at the cusp of an unprecedented opportunity.<\/span><\/p>\n

\"\"<\/p>\n

The New Trump Administration: Who’s in Charge and What They\u2019re Planning<\/b><\/h2>\n

President Trump’s 2025 policies reflect a familiar “America First” stance, spearheaded by his inner circle of hawkish policymakers. Newly appointed Secretary of Commerce Howard Lutnik and USTR head Jamieson Greer have set their sights on tightening trade deals\u2014moves that may indirectly strengthen the dollar, putting further pressure on the rupee.<\/span><\/p>\n

India, already a victim of higher tariffs during Trump’s first term, could once again face challenges in key export sectors like pharmaceuticals, foods, textiles, and IT services. However, the appointment of Scott Bessent, a veteran hedge fund manager, as Treasury Secretary may soften Trump\u2019s hard stance on tariffs.<\/span><\/p>\n

A US-China Conflict: India\u2019s Silver Lining Amid the Storm<\/b><\/h2>\n

The escalating US-China conflict has created a geopolitical divide that India could strategically capitalize on. While global trade policy shifts may pose challenges, the “China+1” strategy offers India significant opportunities, provided proactive measures are taken by the government and industries to bridge gaps left by China.<\/span><\/p>\n

During the previous Trump administration, the trade war began in January 2018 and had a negative impact on US-China trade until 2020 (see below).\u00a0<\/span><\/p>\n

\"\"<\/p>\n

American companies diversifying supply chains could boost India’s manufacturing, especially in semiconductors and consumer electronics, supported by the Production Linked Incentive (PLI) scheme. However, a potential war could disrupt global trade, causing raw material shortages in sectors like automotive components and textiles.<\/span>
\n<\/span>Source: Business World<\/span><\/p>\n

\"\"<\/p>\n

Note: India benefits from the US-India trade because it exports more goods to the US than it imports.<\/span><\/p>\n

RBI\u2019s Balancing Act: Inflation, INR, and Rate Cuts<\/b><\/h2>\n

The Reserve Bank of India (RBI) has its task cut out. With US bond yields and the dollar index surging due to strong economic data, the INR could come under further pressure; which is already trading near all-time lows, hurting India\u2019s trade balance. However, if inflation cools down by mid-2025, thanks to falling global demand, especially private expenditure and consumption, the RBI might consider rate cuts to boost economic growth. This move would align with the US Federal Reserve\u2019s move towards easing monetary policies.<\/span><\/p>\n

\"\"<\/p>\n

Sectors to Watch: Risks and Rewards<\/b><\/h2>\n

Hurting Sectors:<\/b><\/h3>\n