What are Reciprocal Tariffs? How Will It Impact India?

Reciprocal tariffs are taxes that one country imposes on imports from another country, which is equal to the tax rate imposed by another country on its goods. The principle is to create a system where “if they sue us, we charge them – the tariffs on the eyes, the tariffs, the same amount”.

What is a reciprocal tariff?

Tariffs are imposed on products imported from other countries. Mutual tariffs are when the United States imposes taxes on the importing country at the same rate as the United States. This system will make our import duties in compliance with tax rates in other countries. There is no official definition of “reciprocal tariff” in international trade, but rather applies to the terminology intended to be a customs amendment to trade reciprocity and fairness.

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To achieve this mutual tariff, imports can be raised to the level imposed by other countries on U.S. products. Tariff equivalence for various products may increase the average tariff rate in the United States by about 2 percentage points.

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Possible impact on India

Financial analysts at major financial institutions believe India is vulnerable to potentially dangerous risks under the scheme.

• Higher tariffs: India is one of the countries with significantly higher tariff rates and is therefore vulnerable to retaliatory tariffs. Nomura said the weighted average effective tariff on India’s exports to India is 9.5%, while India’s exports to the United States are 3%.
• Weak sector: U.S. tariffs could hit India’s automobiles, textiles and other industries. For example, if India is to impose a 25% tariff on U.S. cars, the U.S. will import 25% of Indian cars.
• Broader impact: Tariffs will lead to the opening of a “general tariff increase” on emerging economies that charge high tariffs on U.S. goods.

Historical background

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The Reciprocal Tariff Act of 1934 allowed the U.S. president to negotiate tariff agreements with other countries to reduce tariffs in exchange for U.S. mutual tariffs. From 1934 to 1945, the United States signed 32 mutual trade agreements with 27 countries. The bill is an institutional reform that aims to empower the president to negotiate with other countries in order to reduce tariffs in exchange for mutual reductions in tariffs in the United States by up to 50%.

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challenge

Having a product-based approach is complex. Although the average tariffs in the U.S. are relatively low, tariffs are higher in “very sensitive” areas such as clothing, sugar and pickup trucks.

Source: https://dinhtienhoang.edu.vn
Category: Optical Illusion