New Delhi, July 31 The latest move by US President Donald Trump to slap 25 per cent tariffs on India can actually be a starting point for renewed negotiation and the Indian government’s response on staying committed to the negotiations speak to that, HSBC Global Research said on Thursday.
President Trump has said he will levy 25 per cent tariff on India and a penalty for buying Russian oil, starting August 1.
The US-India trade deal had already reached advanced stages, but for some sticking points, such as the US demanding access to sectors such as agriculture, dairy and genetically modified feed, which India was reluctant to give, given its large population dependent on agricultural income, according to reports.
Then there were some other sticking points such as trade in animal-based oils, and India’s non-monetary trade barriers (import bans, licensing requirements, etc), which President Trump referred to as “strenuous and obnoxious”.
“A new implicit ask today was for India to stop buying oil from Russia. India is a large importer, buying around $220 billion worth of oil per year to meet its economic needs. Of late, it was buying around 35 per cent of its oil from Russia,” according to the report.
HSBC looked into this data and found that back in 2021, India was buying 3 per cent of its annual oil imports from Russia.
“Over the last 5 years, it lowered its purchases from the Middle East and the US. But it also means that it can go back to buying more from these regions. In fact, already in July, we find a significant decline in India’s oil purchases from Russia,” the report mentioned.
Alongside some give-and-take in the sticking points discussed above, resolving the issue around oil purchases could guide the way forward, according to HSBC economists.
The elevated tariff rate, if levied, could shave off over 0.3 percentage points from India’s growth, and the penalty rate, yet to be specified, could shave off more
Over the last few weeks, President Trump announced tariff rates ranging broadly from 15 per cent (for Japan and the EU) to 20 per cent (for Vietnam, Indonesia and the Philippines). In that light, the 25 per cent tariff rate on India seems on the higher side.
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