India May Be Subject To Lower US Tariffs Compared To APAC Nations: Moody's
In its outlook on Asia Pacific sovereigns, Moody's Ratings said while negotiations will likely lead to some reduction in tariffs and other trade barriers on a bilateral basis, policy uncertainty is challenging investment decisions and disrupting trade.
New Delhi: Global ratings agency Moody’s Ratings on Thursday said that India may be subject to lower tariffs than many countries in the Asia Pacific, which could help the economy attract further investment and become a global manufacturing base. India is expected to be in a good position with reduced tariffs in the coming days though many export-reliant Asia Pacific economies were hit with very high US tariffs in April.
In its outlook on Asia Pacific sovereigns, Moody's Ratings said while negotiations will likely lead to some reduction in tariffs and other trade barriers on a bilateral basis, policy uncertainty is challenging investment decisions and disrupting trade. “Uncertainty about trade policy and a potential overhaul of global trade have raised cyclical and possibly structural credit risks in APAC, and economies like Vietnam and Cambodia, which benefited from a diversification of investment and manufacturing out of China and now face high US tariffs, are particularly at risk,” it said.
“In contrast, India has the potential to emerge as a beneficiary of a tariff-driven shift in investment and trade flows. 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. The signing of a FTA with the UK in May and ongoing efforts to establish the same with the EU will further support such development. However, the US goal to re-shore select manufacturing segments could challenge the extent to which India benefits,” the rating agency said.
Moody’s also said that potential shifts in investment and trade flows stemming from tariffs will take years to materialise, and it is unlikely that multinational companies will make drastic investment changes while there is still significant uncertainty about the magnitude of tariffs and whether they will persist. “Instead, companies will likely slow or pause ongoing investments while they wait for a steady state of trade policies to emerge. Even then, any decision to relocate manufacturing or product sourcing will take years to execute,” Moody's added.
