India unlikely to see major tariff relief from US: Anand Tandon

Synopsis

Independent Analyst Anand Tandon anticipates potential tariff implications for India. He suggests tariffs might settle between 15% and 20%. The US-UK deal is unique. Other nations may face existing tariffs. Tandon highlights textiles as a sector that could gain. This depends on competitor tariffs and US consumer spending. Overall volumes might shrink due to a potential US GDP impact.

"So, we should also up for a level of tariff which is higher than where we left it and somewhere perhaps a little lower than what the threatened tariff were. So, instead of 28% maybe we will end up with between 15% and 20% by and large on an average but that is about it," says Anand Tandon, Independent Analyst.

Help us with your own sense with respect to the tariff implications on India as a market because yes, we are waiting for the final announcement but the trend that we have seen for now is that there has not been much of a change with respect to what Donald Trump announced back on April 2nd and with the 14 odd nations, the major tariffs coming in. Do you believe this case can also hold true for India as well?

Anand Tandon: Certainly, it can. The only reasonable tariff agreement that has happened has been with the UK which is, of course, a very close ally of the US. For most of the others, they have had to kind of stick with the so-called Liberation Day tariff that Mr Trump had announced.

With India, while India has tried to be as reasonable as possible, I am sure the issues will be different when viewed from the US side and it is very likely that we may not get any great benefit in terms of relaxation from the US. So, we should also up for a level of tariff which is higher than where we left it and somewhere perhaps a little lower than what the threatened tariff were. So, instead of 28% maybe we will end up with between 15% and 20% by and large on an average but that is about it.

Also, help us with your take on certain sectors that could stand to benefit if the tariff announcement is in India's favour and even right now our Southeast Asian counterparts have been hit with slightly higher tariffs compared to what we are expecting to see for us at least. You have sectors like textiles that are doing very well today. What is your sense on this sector and some of the other external facing sectors that could do well if the tariff announcement goes our way?
Anand Tandon: So, there are two ways of looking at it, either we assume that the US consumer stays where they are in terms of being buying the same basket of products, in which case India is not worse off unless the tariffs are higher than a competitor. It does not matter whether or not the tariffs that India pays are higher than what we used to pay earlier.

But more important the question is which is the competitor who is supplying that. So, for example, in the case of textiles, if it was Bangladesh that was taking away much of the kota-free exports into the US, maybe because of the higher tariffs there, so long as ours are not as high maybe we will actually benefit. So, from that point of view, textiles definitely look like an area that we may get some benefit out of.

The other option, of course, is that there is a downtrading, that the US consumer is already very stretched and therefore ends up downtrading. Here too, you may find that actually the developed markets may have a little bit more of a challenge especially if kotas, for example, from Japan and euro area continue to remain high, that India could benefit relative to the others.

However, in that context you have to assume that the overall volume will actually shrink because there will be a negative impact on the US GDP. So, either which way from our perspective it looks like for most of the traditional Indian products you may have a relatively better bargaining position, but the overall volumes may not be as big.

...moreless

...moreless