Saturday, July 26, 2025

US reciprocal tariff announcement not a one-time event but a new trade order, say experts

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The global trade landscape is witnessing a major shift as the United States prepares to roll out reciprocal tariffs on April 2. After decades of trade liberalisation, protectionist policies are making a strong comeback. Experts believe this marks the beginning of a long-term transformation in global trade dynamics, rather than just a temporary shift.Himanshu Tewari, Partner of Trade and Customs at KPMG in India, noted that this move is part of a larger trend. “For the past three decades, we have seen an era of reducing trade barriers and globalisation. That cycle is now reversing, and we are entering a phase where tariffs and trade restrictions will be used more actively by major economies,” he said in a discussion with CNBC-TV18.
Tariffs have become a key tool in trade negotiations, especially under the Trump administration. Rajeev Kher, former Secretary of Commerce, pointed out that tariffs are being used as leverage to bring countries to the negotiating table. “Tariff is simply a weapon. Trade has often been used as a tool by different governments, but now we see a concerted and well-planned strategy where tariff is being used both to initiate negotiations and to pressure trade partners into making concessions,” Kher explained.
The economic impact of US tariffs remains a topic of debate. While some economists argue that they will push up costs for American consumers and businesses, others believe they will help the US reduce trade deficits and bring manufacturing back home.For India, the impact will vary across sectors. Anurag Sehgal, MD of Price Waterhouse & Co LLP, pointed out that key export sectors such as smartphones, textiles, pharmaceuticals, and auto components could face immediate challenges. “Right now, Indian smartphone exports to the US face zero tariffs. If reciprocal tariffs are applied, they could attract duties similar to what India imposes on US imports—potentially 15% or more,” Sehgal said. He added that frozen shrimp, one of India’s biggest agricultural exports to the US, could be particularly vulnerable if tariffs are imposed.

India has been adopting a two-pronged strategy to manage the tariff situation. On one hand, the government has unilaterally lowered tariffs on select US products, including high-end motorcycles and whiskey. On the other, it is engaging in bilateral discussions with Washington to secure better market access for Indian goods. Tewari emphasised that this is just the start of a prolonged period of negotiations. “April 2 is not a one-time event. It signals a changing global trade order that will evolve over the next decade,” he said.

In the short term, some Indian industries may struggle to adjust to new tariffs. However, in the long run, these changes could work in India’s favour by making its exports more competitive compared to other countries facing even higher US tariffs. “Whether these tariffs end up hurting or benefiting Indian exporters depends on how they compare to competing nations. In some cases, they may even give Indian exporters an edge,” Sehgal noted.

With just hours to go before the US announces its reciprocal tariffs, businesses around the world are bracing for the impact. India, which may receive a temporary reprieve, remains in a wait-and-watch mode.

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