No More Bark: Trump's Tariff Bite

THE TAKE 

Trump Sets New World Order With Tariffs, But Will India Have An Advantage?

The world order that all of us grew up with has changed. India has been hit by a 26% tariff by the US in what it has called discounted reciprocal tariffs. The number, however, has to be seen in contrast to several factors.

Relative tariffs matter, and if India is hit by even slightly lower tariffs than other exporting countries for the same product, then it has a possible advantage.

Second, negotiations are still going on, but that does make the uncertainty worse. It is likely that things could get better from here.

Finally, even if India is at a relative tariff advantage, it is not clear how higher prices will affect consumption in the US, as it surely will.

US president Donald Trump said on Wednesday (Thursday India time) that he will apply a minimum 10% tariff on all exporters to the US and slap additional duties on around 60 nations with the largest trade imbalances with the US. That includes substantially higher rates on some of the country’s biggest trading partners, such as China, which now faces a tariff of at least 54% on many goods, the European Union and Vietnam, Bloomberg reported.

The baseline import taxes will take effect after midnight Saturday, and the higher duties will kick in at 12:01 a.m. on April 9, a White House statement said. Canada and Mexico, America’s largest trading partners, already face 25% tariffs, and they will stay in place. 

The move is expected to draw immediate retaliation from several US trading partners, though not from India.

It’s also a stark break from a decades-long effort following World War II to lower trade barriers as a way to foster commercial ties between nations and prevent armed conflicts, Bloomberg said.

The Markets Got It Wrong

Another takeaway — the markets have got it wrong in their predictions or expectations of Trump’s trade moves being lenient, quite badly, it appears.

Futures tied to the Dow Jones Industrial Average lost 1,069 points, or 2.5%. S&P 500 futures dropped 3.6%. Nasdaq-100 futures lost 4.5% on Thursday. Crude oil prices were down, closer to $73, while spot gold was up, closer to $3,150 per ounce, at record levels.

Mary Lovely, a senior fellow at the Peterson Institute for International Economics, told Bloomberg the tariffs Trump announced Wednesday were “much worse than we feared.” Just how they would be administered was unclear, she said, and there were “huge implications for rerouting of trade” globally.

Chinese imports could face tariffs well above 50%. A tariff rate of 54% on goods from China could lead to a 90% decrease in exports to the US by 2030, based on previous estimates by Bloomberg Economics.

The European Union will have a 20% levy, and Vietnam is seeing a 46% tariff, White House documents showed. Others slapped with larger tariffs include Japan at 24%, South Korea at 25%, India at 26%, Cambodia at 49%, and Taiwan at 32%. 

Treasury Secretary Scott Bessent urged US trading partners against taking retaliatory steps against President Donald Trump’s new set of retaliatory tariffs. “I wouldn’t try to retaliate,” Bessent said in an interview Wednesday with Bloomberg Television. “As long as you don’t retaliate this is the high end of the number.”

“This is the high end of the number barring retaliation,” Bessent said. “As far as negotiations go — we’ll see.”

The Federation of Indian Export Organisations (FIEO), India's apex exporters' body, told PTI that the 26% import duty will "undoubtedly affect domestic players." FIEO’s view is that India is much better placed than many other countries, and the organisation hoped the proposed bilateral trade agreement would be concluded at the earliest, as it would provide relief from these reciprocal tariffs.

"We are much better placed compared to our key competitors such as Vietnam, China, Indonesia, Myanmar, etc. We will definitely be affected by the tariffs, but we are much better placed than many others," news agency PTI quoted FIEO’s chief Ajay Sahai as saying.

Advantage India?

Prabhu Dhamodharan, the convenor of the Coimbatore-based Indian Texpreneurs Association, told The Core Report the tariffs were a medium to long-term opportunity for India.

He said that under this framework, India’s tariff rate is 26%, which is significantly lower compared to many competing nations. In the past, India, Vietnam and Bangladesh were charged similar rates for cotton apparel. 

• Vietnam – 46%

• Sri Lanka – 44%

• Bangladesh – 37%

• China – 34%

This gives India a clear advantage in cost competitiveness, particularly in textiles and apparel and can expand its market share in the U.S., driven by this tariff edge.

Ongoing trade negotiations may further enhance India’s position, particularly if India offers zero-duty import of cotton in return for sector-specific benefits in apparel exports.

The big question mark for all products that are imported into India is, of course, to see how consumers respond and whether they continue to buy at the same intensity at higher prices.

That seems logically tough to expect.

The response of US consumers, including sentiment and consumption behaviour, will play a crucial role in shaping short-term export trends. Whichever way things go, this is a new world order. 

Remember, we are yet to see what these tariffs will bring in the form of retaliation and response, which will surely follow, including extending to new trading blocs and alliances.

China, Korea and Japan likely coming together is the first of those steps. More could follow, and it will be interesting to see how India navigates from here on.

CORE NUMBER

58.1

This is the PMI reading for March — up from 56.3 in February, and the strongest print in eight months, according to Reuters. Compiled by S&P Global, the PMI measures month-on-month changes in manufacturing activity, with a reading above 50 indicating expansion. March’s sharp rebound signals strong domestic demand, even as export orders slowed. Firms saw faster new order growth and tapped into inventories to meet demand, causing the steepest drop in finished goods stock in over three years. Output price inflation also eased to a one-year low, providing some relief.

—✈️ Max Drought! India’s been scooping up Boeing 737 Max planes originally built for China, but that party’s almost over! Boeing’s backlog of these 'white-tail' planes—leftover from Chinese carriers—is nearly cleared, and Air India’s steady flow of two planes a month since September 2023 will end by June. Bloomberg reported that India was receiving the planes as the Chinese airlines were unable to take delivery over regulatory concerns about lithium batteries in the cockpit voice recorders. Air India Express has already taken 41 of the 50 repurposed jets, with just five more due. With fresh Boeing deliveries not expected before March 2026, Tata-owned Air India risks losing ground to IndiGo’s rapid expansion.

—🇮🇳⚡️ India’s EV Tariff Flip. India plans to slash import duties on electric vehicles as part of a proposed trade deal with the US, Reuters reported, even as domestic carmakers urge a delay until 2029. The move is expected to benefit Tesla, whose India entry has been blocked by high tariffs, but could hurt local EV players like Tata and Mahindra. Government sources told Reuters that India wants to “significantly” reduce tariffs, despite fears this could weaken future negotiating positions with the EU and UK. EVs made up just 2.5% of India’s auto market in 2024.

— 🇺🇸🤑 Bye-Bye American Dream? A Washington Post report found that US tech companies are warning their foreign employees on H1-B visas to avoid international travel, because of the uncertainty of the president Trump administration’s H1-B visa policy. Trump has previously criticized the US’s birthright citizenship program, which a source also expressed concern about. Most H1-B visa holders are Indian; already, Indians struggle with getting green cards because of long wait lines, making this unwelcome news for them. 

—🤳 Electronics? Nah. ACs? Maybe! Quick commerce isn’t heating up for high-value electronics—smartphones make up less than 1% of sales, feature phones 2%, and TVs are a non-starter. But ACs and coolers might change the game this summer. As temperatures rise, brands like Daikin, Godrej, and LG are betting on impulse purchases and 10-minute deliveries, The Economic Times reported. While big-ticket items still rely on traditional channels, quick commerce could see a cool boost with plug-and-play appliances like fans and kettles leading the way.

👥 THE TEAM

✍️ Zinal Dedhia, Salman SH, Kudrat Wadhwa | ✂️ Rohini Chatterji | 🎧 Joshua Thomas