As soon as we hear the name of America, our mind remembers the time of tariff war when America had imposed tariffs of up to 50 percent on India’s exports. This tariff came into effect from August 27 and in September itself, the sales of our goods going to America fell by 12 percent.
Sectors like marine products such as shrimp, auto parts and jewelery were hardest hit, but total merchandise exports rose 2.9 per cent from April to September. Exports to America were up 13 percent in April-September, but came down by 12 percent in September. This happened because of front-loading, but the real question is how India came up with a game-changing strategy. Let us explain it to you in 5 easy points.
Question: Which sectors were targeted the most by the Trump tariffs, and how much was the loss?
answer: Gems and Jewelery suffered the biggest blow. America’s exports fell 76 percent in September. There was a 12 percent decline in auto components. Among marine products, shrimp was the most affected, which accounts for 65 percent of total seafood exports and has a value of $ 4.88 billion.
Not only this, 40 percent of sports goods were dependent on America, due to which overall exports came down by 6 percent in October. There was a 25 percent decline in cotton garments and a 10 percent decline in leather footwear. These low-margin sectors like cotton garments, sports goods, carpets and leather footwear also feared competition from China and ASEAN countries. In such a situation, these sectors suffered the most due to tariffs.
Question: How did India find new markets, and how much benefit did it get there?
answer: India’s smartest move was that exporters turned to Asia, West Asia and Europe. There was 25 percent growth in marine products in September and 11 percent growth in October, 60 percent more shipments were sent to China, 37 percent to Japan, 70 percent to Thailand, due to which India got a big benefit.
Apart from this, marine products were also sent to Europe, and there 102 new marine units got clearance, taking the total to 502, which were pending for the last five years.
According to the report of Indian Express, the total export of jewelery has fallen by only 1.5 percent. At the same time, there has been an increase of 79 percent in UAE, 11 percent increase in Hong Kong and 8 percent increase in Belgium. Overall 8 percent growth in auto components, helped by Germany, UAE and Thailand. UAE, Spain, Italy and Saudi Arabia increased in cotton garments, but an overall decline of 6 percent was seen.
According to the report of Indian Express, out of $8 billion exports, $2 billion has been redirected. Container shipments to America decreased by 18.4 percent in October, but to Indonesia increased by 10.1 percent, to Thailand by 3.6 percent, and to Vietnam by 3.6 percent.
Question: How did the domestic market get strengthened with the support of the government?
answer: The government emphasized diversification towards labour-intensive items such as marine products. Approved a package of Rs 45,060 crore, which includes a credit guarantee scheme of Rs 20,000 crore, which gives guarantee on bank loans. The Commerce Department said that the prices should not fall sharply.
India and Slovenia have expressed hope that there will be a free trade agreement between India and European Union soon. Which can reduce the tariff by 12 percent. Seafood export to Europe was $1.1 billion in FY24, now it may increase by 20-25 percent. Russia has been seen as a new market, 25 fishery units are expected to get clearance. Exporters have become more resilient by strengthening the domestic market.
Question: How did diplomacy help, and what was the role of negotiation?
answer: Trade deal negotiations with the US have now advanced and the FTA with Europe has made market access sustainable. The focus on quality assurance has benefited smaller sectors, such as clearance of marine units. Informal trade linkages have increased in Asia and Europe. Exports to Russia have also improved. India has shown through negotiations that not just selling goods, smart talks open new doors.
Question: How successful was this strategy, and what is the future plan?
answer: India’s strategy has been to reduce tariff impact through diversification. The US tariff shock has forced Indian exporters to sell their goods to new countries and the initial indications in the last few months make it clear that our trade relations with other parts of the world, including different parts of Asia, have strengthened. Because of this, the loss of selling less goods to America was reduced to some extent. Now India is going to make a trade deal with America in the coming time, which will be of great benefit to both the countries.
