New Delhi [India]: India currently occupies a relative middle ground following the latest tariff developments by the United States, but any uniform hike under Section 122 could increase its tariff exposure and erode the benefits gained from earlier negotiations, according to a report by Union Bank of India (UBI).
The report noted that countries with prior bilateral trade agreements with the US may face short-term disadvantages, while nations without comprehensive deals could be relatively better positioned in the current environment.
“Countries that negotiated bilateral trade deals with the U.S. appear slightly disadvantaged in the short term, whereas countries without comprehensive agreements emerge as relatively better positioned,” the report stated.
India, according to UBI, has maintained a balanced stance compared to its Asian peers.
“India occupies a relative middle ground. It was among the lowest-tariffed economies within its Asian peer group and largely sidestepped the most punitive reciprocal measures earlier. However, any uniform hike under Section 122 would lift its tariff exposure, eroding some of the relative advantages secured through prior negotiations,” the report added.
The developments follow the US Supreme Court striking down large portions of tariffs imposed by former President Donald Trump, prompting the US administration to signal fresh tariff actions. President Trump initially proposed a 10% across-the-board levy under Section 122 for all countries, later indicating a potential increase to 15% for up to 150 days.
The UBI report also highlighted implications for global currency markets. Higher US Treasury yields generally support the dollar through rate differentials, but fiscal and term-premium concerns could soften the currency if investors factor in additional US fiscal risks.
“With U.S. trade policy uncertainty likely to persist, this adds another reason for negative dollar bias this year. Structurally, ongoing Fed easing expectations and lingering concerns over fiscal discipline and long-end yield control reinforce a softer medium-term outlook for the dollar,” the report noted.
While India remains better positioned than some regional peers, fresh tariff measures under Section 122 could raise its exposure and reduce some of the advantages previously secured, the report concluded.