DW talks to an expert to explore what Trump's new US tariff on India means for Prime Minister Narendra Modi and the country.
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00:00Let's bring in Deepanshu Mohan, Professor of Economics and Dean of the Office of Interdisciplinary Studies at O.P. Jindal Global University in India.
00:09Welcome. Asian markets have been hit especially hard amid the fear of fallout from Trump's tariffs.
00:15How do you see the situation for India, which has been hit with a 26 percent tariff?
00:22Yes, so it's thank you for having me here.
00:25Well, it's a it's a tough moment. I mean, it's a turning point in the economic history of not just the globe, but I think for India as well.
00:34Tough times ahead. It is what could be defined as the demonetization moment for the U.S., which is in context to what is happening across the globe.
00:45Where I see for India, I think the caution needs to be more in terms of trying to renegotiate an effective terms of trade with the U.S., which over a period of time will definitely impact our agricultural goods market, which is more vulnerable to exogenous or external shocks.
01:05I anticipate, I think, to a certain extent, services to not be that heavily impacted in the short term.
01:13But what you're seeing is a lot of diversion of realigned trade policies.
01:18And this is where I think India would would stand to suffer more because you already see oil prices coming down and the volatility in the market, whether it's the stock market or portfolio investment, has been making our domestic economy very vulnerable to external shocks.
01:36So India is at a time, at this point of time, macroeconomically much more vulnerable as it was maybe back in 2007 and 2008.
01:44We were more resilient to exogenous external shocks then.
01:48But we have a situation now that a lot of our supply chains are dependent on imports from China, which is likely to be impacted massively as a result of their own trade arrangement with the U.S.
02:01And it is those diverging routes that will impact the Indian economy much more harder.
02:09Will India be one of the countries going to U.S. President Donald Trump, offering a deal to try to seek tariff relief?
02:17And what kind of leverage does India have there?
02:20I think not much if you would look at what India can possibly offer.
02:27Much of what India has done over the past, where it has a trade surplus, the U.S. is it has done well in service led exports.
02:35And that's where a lot of economists have advised that India stands to benefit more in exports in context to maximizing our competitiveness and services.
02:45Manufacturing, our exposure has been limited, but there are areas which are making or which would make livelihoods vulnerable.
02:53I mean, dairy is a very good example, poultry for that matter.
02:57India exports a lot of rice.
02:58And these are all goods which you would see the demand of those from the Indian market changing as India would be forced to cut down on duties.
03:08There is also on genetically modified products like soya and others, an expectation for India to cut down on duties, which would allow these products to find easier access into the Indian market.
03:20And Indian farming community or what you'd consider as the competitiveness of the domestic manufacturing scene, apart from agriculture, is very weak.
03:27And that makes them or these areas vulnerable.
03:31So, yes, India would not retaliate, of course, but you would expect the renegotiated terms of trade to be more beneficial to the U.S. terms vis-a-vis India.
03:42And I think that's where I would say we have much lesser leverage than that, as one would imagine the case to be.