India may be subject to lower US tariffs compared to APAC nations: Moody’s

By Admin

04 Jul, 2025

India may be poised for a significant advantage in the global trade arena, as Moody’s Ratings highlights its potential to be subject to lower US tariffs compared to many Asia-Pacific (APAC) countries. This favorable position could attract greater foreign investment and enhance India’s role as a global manufacturing hub.

Tariff Trends Favor India Amidst APAC Pressure

Moody’s Ratings, in its latest outlook on APAC sovereigns, noted that several export-dependent APAC economies were hit by steep US tariffs in April 2025. Countries like Vietnam and Cambodia once prime beneficiaries of diversification away from China now face high tariff barriers that jeopardize their recent trade gains. These changes are creating both cyclical and structural credit risks for the region.

In contrast, India may emerge as a key beneficiary of this tariff-driven realignment. According to Moody’s, “India may be subject to lower tariffs than many in APAC, which could help the economy attract further investment flows and support its development as a global manufacturing base.”

Trade Negotiations and Policy Uncertainty

Despite its relatively favorable tariff position, India is not completely shielded. On April 2, the US imposed an additional 26% reciprocal tariff on Indian goods, which has currently been suspended for 90 days. However, the baseline 10% tariff remains in place. India is actively seeking full exemption from the additional levy and is engaged in discussions with the US to finalize an interim trade agreement before the suspension ends on July 9.

While India pushes for greater access for its labor-intensive exports, the US seeks concessions for its agricultural products. The outcome of these negotiations could be pivotal for shaping future trade relations and determining India’s competitive position.

Strategic Agreements and Global Manufacturing Role

India’s proactive trade strategy, including the signing of a free trade agreement (FTA) with the UK in May and ongoing negotiations with the EU, underlines its commitment to becoming a manufacturing powerhouse. However, Moody’s cautions that the US’s push to reshore manufacturing could temper India’s gains, depending on how global trade dynamics evolve.

Long-Term Impact and Business Sentiment

Moody’s emphasizes that shifts in investment and trade patterns due to tariffs will unfold gradually. With uncertainty looming large, multinational companies are unlikely to make immediate strategic decisions regarding manufacturing relocation. Most are expected to delay or pause ongoing investments until global trade policies stabilize.

“Even then, any decision to relocate manufacturing or product sourcing will take years to execute,” Moody’s notes.

Outlook for 2025: A Mixed Bag

Amid these developments, Moody’s anticipates a weaker global economic outlook, leading to a more accommodative interest rate environment in the latter half of 2025. This could influence capital flows and investment decisions, adding another layer of complexity to the evolving trade landscape.

In summary, while India’s relatively lower exposure to US tariffs offers a unique opportunity to attract investment and expand its manufacturing base, the road ahead depends on the outcome of critical trade negotiations and global policy shifts.