Japan records surprise trade deficit in July as exports weaken further
Investing.com -- India is set to face the full brunt of U.S. tariffs starting August 1, with the 25% rate effectively unchanged from the original April announcement.
"It’s like the four months changed nothing, as the 25% tariffs announced for India starting August 1 are almost identical to what India was supposed to “pay” according to April 2 announcement," Bernstein analyst Venugopal Garre said in a note.
Meanwhile, the trade conditions for India have actually deteriorated.
In April, India appeared relatively well-positioned, facing 26% tariffs compared to Vietnam’s 46% and Indonesia’s 32%. But recent trade deals have reshuffled the deck.
“Now, both of them enjoy far lesser tariffs than India,” Garre writes, adding that Vietnam is at 20%, Indonesia at 19%, and Japan at 15%. India, meanwhile, has not secured any exemptions or adjustments and risks additional penalties for its ongoing crude and arms trade with Russia.
The analyst flags that the Russia-related penalty is still undefined and could further erode India’s competitive standing. “The more things have remained same for India these four months, the more they have worsened,” the report says.
Garre also questions whether a deeper breakdown in India-U.S. relations is unfolding. Trade deal hopes that persisted into June have now faded.
“Even till last week, India was hopeful of having 15% tariffs, lower than those levied on Indonesia. Yet, here we are,” he says, pointing to multiple unresolved issues, including defence and Russia ties.
Moreover, Garre observes that, based on President Trump’s recent language, the improving relationship between India and the U.S. appears to have significantly deteriorated over the past couple of months. While the exact cause is difficult to pinpoint, he suggests the shift likely occurred around the time of the India-Pakistan conflict.
On a more positive note, short-term macro impact is limited, as services remain outside the tariff scope and merchandise exports to the U.S. account for roughly $85 billion—only a small fraction of India’s near-$4 trillion GDP.
But the longer-term damage could be more pronounced. The electronics segment, led by fast-growing mobile phone exports, is particularly vulnerable.
“Electronics exports, which have grown nearly 40% in the recent years to almost $30 billion in FY2024, are bound to see a growth arrest, Garre said.
Auto parts and EMS firms are also expected to feel the squeeze.
The question now, Bernstein notes, is whether this is merely a temporary setback—or the beginning of a more protracted deterioration in bilateral ties.
"A trade deal, while still possible, is unlikely to provide a breakthrough amid signs of these strained ties. 2025 might still spring up surprises like it has so far. But for now, let’s celebrate another missed opportunity this year," he concluded.