In what ways can secondary and tertiary effects of foreign tariffs challenge the Indian economy beyond direct trade losses?

When a country like the U.S. imposes tariffs, the immediate impact is seen in reduced exports from India to that country. However, the secondary and tertiary effects can go much deeper, affecting various sectors and stakeholders indirectly. These effects can challenge the Indian economy in the following ways:

• Supply Chain Disruptions: Indian firms that supply intermediate goods to exporters may face reduced demand, even if they do not export directly. This can affect small and medium enterprises (SMEs) and ancillary industries.
• Global Value Chains: If tariffs disrupt global value chains, Indian companies integrated into these chains may lose business or face increased costs, reducing their competitiveness in other markets.
• Investment Uncertainty: Heightened trade tensions can create uncertainty, discouraging both domestic and foreign investment in affected sectors and related industries.
• Job Losses: Sectors indirectly linked to exports (e.g., logistics, packaging, transport) may see job losses due to reduced activity, impacting livelihoods beyond the directly affected industries.
• Commodity Price Fluctuations: Tariffs can lead to oversupply in the domestic market, causing prices to drop and affecting farmers and producers who were not directly exporting.
• Currency Volatility: Reduced export earnings can put pressure on the Indian rupee, leading to currency fluctuations that affect import-dependent sectors and overall economic stability.
• Retaliatory Tariffs: If India responds with its own tariffs, this may escalate trade tensions, impacting other sectors not initially targeted and leading to broader economic consequences.
• Reduced Technology Transfer: Tariffs can strain international relationships, slowing down technology transfer and collaborations that are crucial for sectors like IT, pharmaceuticals, and manufacturing.
• Impact on Stock Markets: Negative sentiment due to trade wars can lead to stock market volatility, affecting investor wealth and confidence across the economy.
• Changes in Consumer Behavior: Higher prices for imported goods or reduced income in affected sectors can lead to lower consumer spending, impacting retail and service industries.