Quote by Mr. Saurav Ghosh, Co – Founder at Jiraaf
“Asian countries have a higher trade deficit with the US along with EU, so it is natural that they are higheron the list. A 54% tariff on China, 46% on Vietnam, 37% on Thailand and 25% on Korea lead the way. US has a $120bn trade deficit with the Vietnam alone. The example cited by President Trump of Toyota importing more cars to US reducing the opportunity for domestic players like GM and Ford exemplifies the thinking behind the move. Reduction of trade deficit being the driving thought, President trump said that non tariff barriers including domestic VAT and unfair currency rates have played a part in determining reciprocal tariff. The raising of tariff is ultimately the old trick in the book to bridge labour cost gaps. It is a protectionist attempt to bring manufacturing back to US which remains unlikely in the short term. Asian countries have maintained lower labour cost and built significant capabilities including infrastructure (Especially China) for manufacturing along with maintaining a favourable currency. They continue to be the manufacturing hub of the world. It is hence not surprizing to see that President Trump taking a harsher line on Asian countries.”
Quote by Mr. Vineet Agrawal, Co – Founder at Jiraaf
“The reciprocal tariff is higher than expected, however the silver lining for India is that it remains on the lower end when compared with China, Vietnam, Bangladesh and Thailand. As President Trump attempts to bring manufacturing to the US, he has ignited a high stakes gamble which has raised the possibility of high inflation in the short term followed by a recession. As early reactions from Australia, South Korea and China suggest, there would be measures that impacted countries would take to reverse the impact of globalization and impact global trade flows. It is also worrying that there might be more sector specific tariff that might be announced later. While manufacturing shift remains improbable in the short term due to differential in labour cost, countries will try to re-negotiate tariffs with trade agreements to establish a plausible way forward.
Regards to tariff on India, it is good to note that currently Pharma and semiconductor remains exempt. However, the net GDP impact would be c. 0.4%-0.45% of GDP. It would be critical to understand impact on key commodities like oil and gold in an uncertain economic environment which could fuel domestic inflation. From a markets standpoint, the higher tariff on other countries could also possibly lead to some positive flows in India if the domestic indicators turn stronger.”