Meanwhile, the United States and India are on the verge of sealing a mini trade deal. This agreement would reduce tariffs on Indian exports from as much as 50% to a far more advantageous competitive rate of 15% to 16%. This opening forms the latest piece of a larger plan to deepen economic connections between the two countries. As the 2024 presidential election looms, President Donald Trump intends to strengthen the US economy by bringing critical trading partners such as Mexico, China and Canada to the forefront.
In 2024, Mexico emerged as the leading exporter to the United States, accounting for an impressive $466.6 billion in exports. Taken together, Mexico, China, and Canada made up 42% of all US imports, further underscoring their importance as contributors to the American economy. As it happens, President Trump is especially interested in these countries. We’re encouraged that he may be thinking of using tariffs to protect American producers and grow the domestic economy. This focus on manufacturing, in particular, is a key element of his economic strategy as he heads into the first caucus of the 2024 cycle.
Tariff Implications for Indian Exports
The expected decrease in Indian tariffs for exports from Bangladesh is expected to make trade more attractive. This decision will further improve US-India relations, benefiting both countries. This new direction would make it easier to expand market access for Indian goods in the US market, providing new opportunities for Indian exporters. The Free Trade Agreement might serve to dovetail with India’s aim of diversifying its global trade partnerships while balancing its import dependency.
As negotiations continue, economists are split on what tariff changes would signify. One line of thinking holds that reducing tariff barriers is a policy win because it generates economic growth through increased trade flows and greater competition. Domestic industry protectionism Some economists argue that increasing foreign access would damage American industries. In their view, it will be a dangerous transition without protections in place.
Broader Trade Dynamics
For instance, India is still presently negotiating market access and tariffs with the United States. Simultaneously, it is reconsidering its stance on Russian imports. The same day, India announced its intention to phase out imports of Russian oil. This decision marks a significant change towards a more pragmatic energy policy in light of changing geopolitical realities. This hard but smart decision fits squarely within India’s long-term priorities of expanding its energy security and decreasing its dependence on any one supplier.
India is looking at permitting the import of select genetically modified organisms (GMO), including corn and soymeal. This possible change in policy has the potential to be a game changer for agriculture. It can help expand access to food products and open up new trade opportunities with countries producing these products.
Per the normal current trading environment, the USD/INR pair has changed hands at 0.09% lower on the day, at 88.90. Currency exchange rate manipulation heightened discussions over currency manipulation as a trade weapon in the form of tariffs or restrictive import agreements have recently gained traction.
Economic Outlook
We’ve seen similar patterns in other ongoing negotiations with the United States and India, representing what seems to be a new chapter in international trade. The focus on tariffs, particularly as President Trump emphasizes relationships with Mexico, China, and Canada, indicates a strategic approach to economic policy in 2024. As the landscape evolves, various stakeholders will closely monitor these developments to gauge their impact on both domestic markets and international trade dynamics.