US tariff hike on Indian exports reflects geopolitical pressure, not economic rationale: Professor

Jamshedpur, Aug 26 (PTI) The imposition of a 50 per cent tariff on Indian exports by the United States, linked to India's discounted imports of Russian crude oil, reflects a geopolitical manoeuvre rather than a legitimate economic policy, said Professor Trilochan Tripathy of XLRI Jamshedpur.

The tariff escalation is expected to disrupt bilateral trade flows, serving more as a tool of hegemonic arm-twisting than a neutral policy adjustment, he said.

"The structure of these tariffs indicates a strategic attempt to re-align US trade interests, disproportionately disadvantaging India," Prof Tripathy remarked.

India now faces a significant economic challenge that goes beyond an immediate dip in export volumes, he said and added that the steep tariff hike, raising duties to 50 per cent on Indian goods while cutting tariffs for competitors to 15-20 per cent could erode India's global competitiveness and strain its macroeconomic fundamentals.

"This policy shift redistributes market share to countries such as Vietnam, Bangladesh, and Mexico," the Finance faculty member of Xavier School of Management explained.

"The intent appears less about trade correction and more about punitive targeting of India," he said, adding, however, unlike in previous decades, India enters this challenging phase with increased resilience as the country has developed a diversified export base and strengthened its trade relations across Asia, Africa, and the Middle East.

"Financial markets have responded unevenly," said Prof Tripathy.

While the tariff hike could shave off 0.3 to 0.5 percentage points from GDP growth, India's robust domestic demand and a strong services trade surplus provide essential buffers, he said.

The US tariffs have effectively doubled duties across a broad spectrum of Indian exports, with sharp increases in sensitive sectors.

Labour-intensive sectors such as textiles, leather, gems and jewellery, and engineering goods are particularly vulnerable, he said and added that competitor nations, including Vietnam, Bangladesh, Thailand, Turkey, and Mexico, are well-positioned to gain market share.

Auto components face potential substitution under the framework, while key agri-exports like basmati rice and shrimp may be displaced by suppliers from Ecuador and Vietnam.

Although India's IT services sector remains unaffected, its positive contribution may only partially offset broader export declines, Prof Tripathy said and also highlighted the counterproductive effects on US firms.

"These tariffs will raise input costs for American companies, strain profit margins, and disrupt existing supply chains with long-term inefficiencies even if the policy is reversed later," he said, adding despite the immediate challenges, India's growing trade diversification across West Asia, Africa, Southeast Asia, and deepening engagements with the EU, UK, and UAE provide important avenues for strategic rebalancing.

The "Make in India" initiative continues to expand the country's industrial capacity and supports its long-term export ambitions, he said, adding that India must now adopt a pragmatic, multi-pronged strategy and reduce its export dependence on the US to below 10 per cent in the medium term.

"The task ahead is to convert this short-term economic pressure into long-term strategic positioning through deeper alliances, energy security, and macroeconomic resilience," he said. PTI BS NAM RG