India taking proactive measures to close tariff gaps with the US: PwC's Sehgal

The United States plans to impose reciprocal tariffs on imports effective from April 2. President Donald Trump has termed April 2 as “liberation day” for the US and announced that tariffs would be imposed on all countries including India.

This has created uncertainties among businesses and roiled the stock markets globally. Analysts and experts are scrambling across the world to assess the impact of Trump’s tariff-related announcement on April 2.

Managing Director of Price Waterhouse & Co Anurag Sehgal has a deep understanding of international trade and tariffs. A former Indian Revenue Service (IRS) officer, Sehgal represented India in several bilateral and multilateral trade negotiations. In an interview with DH’s Gyanendra Keshri, Sehgal talks about the possible impact of Trump’s tariff moves on the Indian economy and businesses. Edited excerpts:

What is your expectation from the US reciprocal tariffs announcement? How will it work?

I think reciprocal tariffs will be imposed especially on those countries with which the US has a considerable trade deficit. So initially the announcement may be focused on 10 to 12 major trading partners. Whether the reciprocal tariff is going to be country specific, goods specific or sector specific, it’s not clear yet. That we will have to see. But the latest signaling is that it may not be very expansive, rather it would be focusing on certain sectors, on certain countries, but let’s see how it unfolds.

How will it impact India?

Certainly India will be impacted. If you talk about merchandise trade, the US has a trade deficit with India. However, it is not as high as with other countries like China, Mexico and Canada. Tariffs imposed by India on US goods are not abnormally high. In fact, they are within the WTO limit. The trade weighted average tariffs of India on the US goods is close to 7.7 per cent. The US’s weighted average tariffs on Indian goods is 2.8 per cent. So there is roughly around a 5 per cent gap. India has already started working towards closing this gap. India has announced the changes proactively. Certain changes were announced in the budget. For example, duties on Harley Davidson bikes, bourbon whiskey, Ethernet switches and the US GI products, have been reduced. Abolition of equalisation levy on digital advertisements, which was colloquially referred to as the ‘Google tax’, is a good move. It will send a positive message to the American MNCs.

Some analysts argue that the US tariff move would be positive for India. Do you agree?

Yes. I see three benefits. One, the diversification process may accelerate. Businesses as well as the government will now try to reduce dependence on sources of supplies. It will give a push to trade agreements. You may see faster conclusion of trade deals with the EU, the UK and the other countries. Second, the landed cost of the Indian goods in the US, in spite of the additional tariffs, would be much less than our competitors, say for example China. So we will have a competitive advantage. Third, India and the US are negotiating a trade deal amidst all this global disruption. If we are able to close a focused trade deal, trade ties with the US will even further strengthen.