India’s economy is set to face only a marginal impact from the proposed tariff hikes by Donald Trump, according to a recent report from Bloomberg Economics. The analysis suggests that if Trump is re-elected in November and proceeds with plans to impose a 60% tariff on Chinese goods and 20% tariffs on other countries, India's gross domestic product (GDP) could decline by 0.1% by the year 2028. This decline is projected to stem from a significant slump in global trade induced by these tariffs and a potential decrease in India's competitiveness compared to its peers.

Trump's rhetoric has intensified as he continues to issue trade warnings to India. On Thursday, he labeled India as the “biggest charger” of tariffs, referring specifically to the import taxes levied on products like Harley Davidson Inc. This accusation echoes complaints he made during his first term, where he took issue with high tariffs imposed by India on American goods. In 2019, Trump also terminated India’s designation as a developing nation, which had allowed the country to export thousands of products to the US duty-free. This move prompted New Delhi to retaliate by increasing tariffs on several products, illustrating the tense dynamics in US-India trade relations.

Despite these tensions, Trump has maintained a friendly tone toward Indian Prime Minister Narendra Modi, referring to him as a friend and the “nicest human being.” This complex relationship underscores the dual nature of economic and political interactions between the two nations.

Bloomberg Economics posits that India has the potential to offset the adverse impacts of Trump’s trade barriers. By increasing manufacturing subsidies and reducing average import tariffs, India could enhance its GDP. The economists estimate that a combination of a 4% production incentive along with a 1 percentage-point reduction in import tariffs could lead to a 0.5% increase in GDP above the baseline forecast. This strategy reflects India’s resilience and adaptability in the face of international trade challenges.

As the world watches the unfolding scenarios surrounding US-China trade relations, the impact on India remains a focal point of concern. With the US being India's largest trading partner, having bilateral trade valued at approximately $127 billion, the stakes are high for both nations. The potential tariffs could reshape trade dynamics and influence India's economic strategies moving forward.

Political analysts are closely monitoring how India navigates these challenges and whether it can leverage its manufacturing sector to mitigate the risks posed by Trump's policies. The focus on manufacturing aligns with India's broader economic goals of enhancing self-reliance and boosting domestic production capabilities.

As this situation evolves, it serves as a reminder of the intricate web of global trade and the potential repercussions of political decisions on economic realities. The 2024 US elections will likely have far-reaching implications, not just for the US, but also for countries like India that are intricately linked to the global economy.

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