India currently finds itself in a relatively balanced position following the latest round of tariff actions by the United States, but potential increases under Section 122 could dilute some of the advantages it secured earlier, according to a report by Union Bank of India (UBI).
The report suggests that countries which had already concluded bilateral trade arrangements with the US may face short-term disadvantages in the evolving trade landscape. In contrast, nations without comprehensive agreements could be comparatively better placed amid the renewed tariff uncertainty.
India, however, has so far managed to stay in what the report describes as a “middle ground” among Asian economies. It was previously among the lower-tariffed nations in its peer group and avoided the most severe reciprocal measures during earlier rounds of trade tensions.
Despite this relatively favourable positioning, the report warns that any across-the-board tariff increase under Section 122 of US trade law could raise India’s overall tariff exposure. Such a move would erode some of the relative gains achieved through past negotiations.
Background to the Latest Tariff Developments
The fresh tariff push follows a US Supreme Court ruling that invalidated large portions of tariffs imposed earlier by President Donald Trump. In response, the administration signaled plans to reintroduce tariffs using Section 122 authority.
Initially, a 10 percent uniform tariff was indicated for all countries. However, the rate was later revised to 15 percent for a maximum duration of 150 days.
Impact on Currency and Bond Markets
The UBI report also highlights the broader financial market implications of renewed US tariff measures. Changes in trade policy have influenced movements in the US dollar and Treasury yields.
Higher long-term yields can typically support the dollar through interest rate differentials. However, concerns about fiscal deficits and rising term premiums may steepen the yield curve and weaken the dollar if investors begin factoring in greater fiscal risk.
Following the Supreme Court ruling and subsequent tariff announcements, US Treasury yields fell as markets evaluated the potential economic impact.
The report adds that persistent uncertainty around US trade policy could weigh on the dollar in the medium term. Expectations of continued Federal Reserve easing and concerns regarding fiscal discipline further contribute to a softer outlook for the US currency.
Outlook for India
While India currently remains better positioned compared to several peers, the report cautions that renewed tariff actions under Section 122 could increase its exposure and narrow the competitive advantages it has maintained so far.
The evolving US trade policy landscape will therefore remain a key factor shaping India’s export prospects and broader macroeconomic outlook in the months ahead.
Originally published on 24×7-news.com.
