Blitz Bureau
NEW DELHI: The bilateral tariff reset between India and the United States has been greeted as a market-friendly breakthrough. But once the initial rally fades, the deal looks less like a decisive shift and more like a carefully managed truce — useful, but limited in scope, durability, and strategic depth.
To begin with, the reset is selective. While most Indian exports now face an 18 per cent duty, the toughest barriers remain firmly in place. Section 232 tariffs on steel, aluminium and copper continue at 50 per cent, and several auto components still attract duties of around 25 per cent.
These exclusions matter. They cut directly into the sectors India has prioritised under its PLI schemes and weaken claims that the agreement meaningfully advances manufacturing competitiveness or supply-chain relocation away from China.
More importantly, the arrangement rests on executive discretion, not treaty commitment. Key tariff lines and non-tariff conditions are yet to be formally notified, leaving exporters vulnerable to abrupt reversals.
Under President Donald Trump’s second term, tariffs are instruments of domestic signalling as much as trade policy. Predictability, the single most valuable currency for exporters, remains elusive.
Whether the tariff reset delivers lasting gains will depend on execution, resilience to policy shocks, and India’s ability to convert trade openings into sustained competitiveness across sectors and shifting geopolitical alignments over the medium term
Tariff relief, moreover, is not a substitute for competitiveness. Indian exporters continue to struggle with high logistics costs, regulatory friction, and uneven scale. These disadvantages are most visible in labour-intensive sectors such as textiles and apparel, where Vietnam and Bangladesh retain clear advantages in turnaround times, buyer integration, and labour flexibility. Without domestic reforms that lower transaction costs and improve reliability, tariff parity alone will not deliver sustained market share gains.
The question of reciprocity also looms large. Trade resets are rarely one-sided. India is likely to face renewed pressure on digital trade rules, data localisation, agricultural access, and intellectual property — areas where political red lines are tightly drawn. Any concessions here would test the balance between export ambition and policy autonomy.
At the macro level, optimism carries its own risks. The rupee’s post-announcement appreciation signals confidence, but prolonged capital inflows could undermine price competitiveness if left unmanaged — particularly for smaller exporters operating on thin margins.
Markets, meanwhile, appear to be extrapolating certainty from an inherently conditional arrangement. Equity gains assume smooth execution, geopolitical calm, and reform momentum. Experience suggests trade euphoria tends to peak early, before reality asserts itself.
The tariff reset is a tactical gain, not a structural breakthrough. Whether it delivers lasting gains will depend less on headline duty cuts and more on execution, resilience to policy shocks, and India’s ability to convert trade openings into sustained competitiveness across sectors, cycles, and shifting geopolitical alignments over the medium term.