Indian Rupee hits record low amid Trump Tariff fears, Chinese Yuan gains momentum

US tariffs impose 50% on Indian exports vs 30% on Chinese goods, hurting textiles & engineering. Rupee’s fall may offer slight relief, but $55-60B losses risk jobs in key sectors. RBI monitors yuan-rupee slide.

New Delhi: According to economists, a 50% tariff is being imposed on Indian exports by the US, while only a 30% tariff is applicable to Chinese goods. Due to this differential, China is getting a trade advantage, as their products remain cheaper than Indian products in the US market.

IDFC First Bank economist Gaura Sen Gupta said that this tariff differential is directly affecting India's sectors like textiles, engineering goods, and chemicals, which compete with China in the US market.

Limited benefits of rupee weakness

The fall of the rupee against the yuan may bring partial relief to Indian exporters, as it may make Indian products cheaper than Chinese products. It may also help in reducing the trade deficit between India and China.

Dheeraj Nim, foreign exchange strategist at ANZ Bank, said that the Reserve Bank of India (RBI) will welcome the weakness of the rupee against the yuan, as it does not involve any significant fall against the dollar. This week, the rupee has fallen more than 1% against the yuan, but it has weakened only 0.3% against the dollar and remains above the 88-rupee level.

Possible long-term impact on the economy

This currency change adds a new challenge to India's economy, which is already grappling with the Trump administration's "draconian" tariffs. According to Chris Wood, global head of equity strategy at Jefferies, India could lose $55-60 billion due to these tariffs, hitting employment-intensive sectors such as textiles, footwear, jewelry, and gems. This will not only reduce exports but may also have a negative impact on employment, which could impact India's economic growth rate.

America might have forgotten that it is the same India that stood firm against its economic sanctions when it successfully conducted its first nuclear test against American bravado. And it is the same Russia that has been incessantly supporting India for decades without backstabbing us. Now it's high time to make them realize India's true potential.

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