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Q 464: What are the implications of the recent US tariff imposition?
A: 1. Imposition of US tariff against many countries of the world has created a long-lasting impact on the global economy.
2. Import tariff will have direct impact on landing cost of imported goods.
3. One of the objectives of imposing import duty is to generate revenue for the country.
4. If the tariff is high, import will be less and vice versa.
5. Sometimes, tariff is imposed to achieve an objective other than revenue. This objective can be politically driven.
6. The recent announcement of tariff by the US is for the purpose other than revenue.
7. In a landmark executive action, the US President signed an order adjusting import tariffs based on reciprocal trade imbalances and national interest objectives.
8. The tariff rate for India is 26% up from previous levels. For example: plastic films previously had 5.8% duty; it has now increased by 26%, so it will be at 31.8%.
9. 70+ countries have been affected.
10. The implementation of the order was from 05.04.2025 with an initial levy of 10%.
11. From 09.04.2025, the full rate as per the Order was to be implemented. However, the same has been postponed for 90 days.
12. Goods already loaded onto a vessel at the port of loading and in transit on the final mode before the specified timing, but landing after the date shall not be subject to these new ad valorem rates of duties.
13. There are certain products which are excluded from the ad valorem tariffs. These items are listed in Annex II of the executive order.
14. Some of the products are as follows:
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Copper
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Fluorspar
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Many chemicals
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Aluminum |
Graphite |
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Bauxite |
APIs |
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15. For the purpose of understanding the implication of import duty in the US, the exporter must acquaint with HTSUS (Harmonized Tariff Schedule of the United States) classification of export product, which is now more critical than ever.
16. The rates of duty established by this order are in addition to any other duties, fees, taxes, exactions or charges as applicable to such imported articles, except as provided in the exemptions of the order.
17. Exporters can refer to https://hts.usitc.gov/ for further details.
18. The effect of the duty is rise in landing cost for the US customer.
19. Since the import duty imposed on China is far more than us, therefore import will not be diverted to China. It may be the other way round.
20. US importer may consider importing from other countries whereby they have comparative advantage in landing cost.
21. Every Indian exporter should take necessary strategic steps to minimise this impact and retain the customer.
22. Indian exporter is advised to remain in communication with US customer on ongoing basis and try to understand the mindset of the US buyer.
23. The Government of India is proactively engaged with the US to draw the contours of the India-US Bilateral Trade Agreement (BTA).
24. There will be negotiation by the government of the US with the governments of other countries. This will exhibit the strength and negotiation capability of the government.
25. This situation has many challenges as well as hidden opportunities.
26. The US was India’s largest trading partner in FY24 with exports worth $77.51 billion and imports valued at $42.19 billion.
27. Indian exporters must act now:
* Assess your product lines
* Check the costing
* Create new USP
*Understand revised tariff rates
* Map HTS codes
*Track regulatory updates
* Prepare contingency plans
* Seek government support
28. This is viewed by many people as a backdown on the part of the US.
29. The US imposed tax rate on Chinese imports at 125% after China raised tariffs on US imports to 84%.
30. China and the US have both raised the rates against each other and openly declared a tariff war.
31. The US government has announced a pause of 90 days on most tariffs.