Trump’s tariff proposal opens opportunity for India: Virmani
Subscribe to enjoy similar stories. New Delhi: US President-elect Donald Trump’s pre-election threat of stepping up import tariffs could translate into an opportunity for India to capture a larger share of the US market in the medium term as it could accelerate the re-orientation of global supply chains away from China, federal policy think tank NITI Aayog member Arvind Virmani said in an interview. Trump had proposed during his campaign an additional 10% import tariff on all goods imported into the US and a 60% tariff on goods from China.
According to Virmani, the economic effect of a uniform additional tariff on all US imports will be offset by an appreciation of the US dollar. “When a country puts, let's say, a 10% tariff uniformly on every item it imports, which increases tariff protection by 10% on every item uniformly, economic theory tells you the exchange rate will just adjust to offset it, more or less. So there is actually zero effect on outsiders," said Virmani.
“Theory says it could be offset fully, but even if it is offset by 80-90%, the effect will be marginal on outsiders. So, that is not a big concern for you," said Virmani. Virmani, who had previously served as the Chief Economic Advisor in the finance ministry, explained that when there is a 10% tariff on imports from every country into the US and a 60% tariff on Chinese goods, the relative tariff disadvantage of Chinese goods is of 50%.
“I am not saying this (increase in tariff) is going to happen, but if it happens, this is the economic effect. There would be a whole bunch of short-term effects, but in the medium term, US importers will look for alternative sources—South East Asia, India and Mexico. Recent history shows that Vietnam, Thailand, Mexico
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