Made in India push! US tariffs pave way for domestic manufacturing growth

The US has imposed heavy tariffs on Indian exports in recent years. In 2018, tariffs of 25 per cent were levied on USD 761 million worth of steel and 10 per cent on USD 382 million worth of aluminum imported from India.

Amid concerns over US President Donald Trump's tariff policies, a report by Motilal Oswal suggests that India has the opportunity to strengthen its domestic industries. The report mentioned that while the tariffs pose challenges such as rising costs, exchange rate fluctuations, and potential losses in exports, they also open avenues for India to focus on self-reliance and boost local production.

"While concerns persist regarding escalating costs, exchange rate volatility, and potential ramifications for exports, India can capitalize on trade tensions and fortify its domestic industries," the report said.

The US has imposed heavy tariffs on Indian exports in recent years. In 2018, tariffs of 25 per cent were levied on USD 761 million worth of steel and 10 per cent on USD 382 million worth of aluminum imported from India.

These higher costs made Indian products less competitive in the US market, leading to a 46 per cent decline in steel exports within a year. With American buyers opting for cheaper alternatives, Indian businesses suffered losses.

Another key concern for India is the impact of trade tensions on its currency. The report added that India imports 87 per cent of its crude oil, paying in U.S. dollars. A weaker rupee due to capital outflows triggered by global trade disputes would make oil imports costlier, putting pressure on India's economy. A prolonged tariff war could shrink India's GDP by 0.3 per cent, the report warns.

Despite these challenges, India can turn this situation into an opportunity. Historically, India has maintained higher tariff rates than other major economies. By strategically using import duties and strengthening domestic industries, India can reduce its dependence on foreign goods.

The report highlighted that the trade conflict should push India towards manufacturing self-sufficiency and boosting exports in sectors less affected by tariffs.

Trump's policies aim to balance protectionism with maintaining U.S. competitiveness in the global market. While this creates uncertainty, as per report India can use the situation to its advantage by promoting domestic production, encouraging local investments, and improving trade agreements with other nations.