Arvind Panagariya, the Chairman of the 16th Finance Commission, stated on Saturday that the potential threat of reciprocal tariffs from the US could present an opportunity for India to negotiate mutual tariff reductions. He emphasized that leveraging this situation could lead to a positive outcome, provided both countries engage in a win-win bargain. However, he also cautioned against a tariff war scenario, where escalating tariffs between the US and India would result in adverse consequences.
Panagariya’s remarks came in response to a question about the anticipated impact of US tariff fluctuations on India over the next 3-4 years. President Donald Trump has repeatedly threatened to impose reciprocal tariffs against India, accusing the country of being a ‘tariff king’ and ‘tariff abuser’. The US has announced a 25% tariff on steel and aluminium, effective from March 12, which could impact India’s exports in these sectors.
Highlighting the importance of a constructive approach, Panagariya suggested that India’s economic liberalization has made the country more competitive and efficient. By engaging in reciprocal tariff negotiations with the US, India could potentially gain better access to the American market, particularly in sectors like textiles and clothing.
The recent commitment by India and the US to double their bilateral trade to $500 billion by 2030 underscores the importance of fostering mutually beneficial trade relations. During Prime Minister Narendra Modi’s visit to Washington, both countries pledged to negotiate a Bilateral Trade Agreement and enhance economic cooperation in various sectors.
In 2023, the US-India bilateral trade in goods and services totaled $190.08 billion, with India enjoying a trade surplus with the US. Minister of Commerce and Industry Piyush Goyal’s upcoming visit to Washington is expected to further strengthen trade ties and facilitate discussions on enhancing bilateral trade relations.
Overall, the key message from Panagariya is that India has a unique opportunity to leverage the current tariff threats from the US to secure mutual tariff reductions and improve market access, thereby creating a win-win situation for both countries. By avoiding a tariff war scenario and focusing on constructive negotiations, India can position itself for long-term economic growth and prosperity.
