Trump’s tariffs could reshape supply chains, India’s advantage depends on its tariff level: Ex-WTO Envoy

President Donald Trump’s latest tariffs on at least 14 countries could significantly reshape global supply chains, but India’s potential to benefit hinges largely on the level of tariffs it faces, says Jayant Dasgupta, former Indian envoy to the World Trade Organisation (WTO).In an interview to CNBC-TV18, Dasgupta explained that the ongoing trade tensions are occurring in a challenging environment where the WTO’s dispute settlement mechanism is effectively stalled.
“The US has blocked appointments to the appellate body for a number of years, and by December 2019, the appellate body of the WTO became non-functional,” he said.
This means that countries winning trade disputes at the panel stage cannot get final rulings because appeals are stuck in limbo, rendering the WTO unable to provide redress or enforce rulings in such cases.
He also noted that some WTO members are considering unusual measures to counter the US, including blocking or suspending it, but “there is no provision in the Marrakesh agreement, which set up the WTO, to expel a member.” So, the international trade system is facing a rare and complex challenge.On the tensions with the BRICS countries, Dasgupta suggested that part of the US concern comes from efforts by these nations to trade in their own currencies instead of the US dollar. “Countries like China have started trading with Brazil, Russia, other BRICS members, and non-BRICS members also in their own national currencies,” he said.

The Indian government has even explored trading with the UAE using local currencies. These moves challenge the dollar’s dominance, which Trump appears keen to protect, as reflected in his fluctuating threats of tariffs on BRICS nations.

Regarding supply chains in Southeast Asia, Dasgupta said India’s opportunity depends on tariff levels imposed by the US. “The advantage that India can derive will only come about if India’s tariffs are retained at 10% levels, and Vietnam is at 20%, and Malaysia and the other Southeast Asian nations are again between 25% and 40%, and China is retained at 55%,” he explained. If the US were to increase tariffs on India again to around 25%, any competitive advantage would disappear.

India is currently engaged in talks with the US amid hopes of sealing a “mini” trade deal to avoid further tariffs. The Indian government recently notified the WTO about its proposal to levy retaliatory tariffs on US goods worth over $700 million, following the US increase of tariffs on Indian automobile imports and components.

Watch the accompanying video for the entire conversation.