The Impact of Trade Wars and Tariffs in India

India is very sensitive to trade wars and tariffs as they have consequences for almost every aspect of life in the country. Thus, India, which actively participates in world trade, is not safe from the impact of international trade disputes. First of all, trade wars may endanger global value chains, and some Indian businesses rely on these. There is the likelihood of higher costs associated with intermediate goods imports, such as automotive parts, electronics, and pharmaceuticals, which may increase the final cost of the end product. Imposed tariffs can also affect some of the primary export markets in India, such as the agriculture and textiles sectors. The negative impact of retaliatory tariffs means that exports to these countries decrease, and this reduces export revenues and employment in Indian industries that export their products to the affected countries.

In addition, volatility in global commodity prices due to trade conditions may have implications on its balance of trade and forex reserves. Falling export revenue or rise in import cost can negatively affect the Indian trade balance and may result in a heavy loss of currency, and be domestically pressured. To mitigate the effects of trade wars or tariffs, India may shift its trade strategies and look for new markets and better trading partners. Certain measures like the ‘Make in India’ drive are taken to enhance local production to withstand the harsh effects of trade distortions. All in all, as India continues to forge its path as a future economic giant, it cannot avoid addressing the implications of trade wars and tariffs with carefully designed and executed policies and diplomacy. Sustained economic growth while building a buffer against the shocks outside the country remains imperative for India’s development in the changing trade environment.