India-US Trade Paradox: Declines Under Low Tariffs, Growth Under High

A curious dynamic has emerged in trade relations between India and the United States. Contrary to conventional expectations, commerce seems to diminish when tariffs are low, while increasing when tariffs are higher. This unusual pattern warrants a closer look to understand the underlying factors driving it.

The standard economic model suggests that lower tariffs should stimulate trade by making goods cheaper and more accessible. Conversely, higher tariffs are usually expected to dampen trade by increasing costs and reducing competitiveness. That said, the reality is a bit more complicated. the India-US trade relationship appears to defy this logic, presenting a puzzle for economists and policymakers alike.

Several potential explanations could account for this unexpected trend. These might include:

• Non-tariff barriers:** Other trade restrictions, such as regulatory hurdles or import quotas, could be playing a more significant role than tariffs alone.
• Currency fluctuations:** Changes in the exchange rate between the Indian rupee and the US dollar could offset the impact of tariffs.
• Global economic conditions:** Broader macroeconomic trends, such as recessions or booms, could influence trade flows regardless of tariff levels.
• Specific industry dynamics:** Unique factors affecting particular sectors, such as technological advancements or shifts in consumer demand, could outweigh the effects of tariffs.

Further research and analysis are needed to fully unravel the complexities of this India-US trade paradox. Understanding the drivers behind this trend is crucial for formulating effective trade policies that promote mutually beneficial economic growth.