If the Indian government unexpectedly announces that it will be imposing higher tariffs on foreign goods one year from now, what will happen to the value of the Indian rupee today?

In the forex markets, currency appreciation refers to the increase in the value of one currency in comparison to another.

If India were to impose unexpectedly high tariffs on unfamiliar products, the following recommendations for the currency and the economy as a whole would be made:

• Assuming that taxes have a positive impact on the trade balance, the value of trade currency will rise. However, there is a risk of retaliation from the country that is bringing them in.
• Assuming that many products use imported natural substances that are currently significantly more expensive, the value of the currency will depreciate.

As a result, it will have a significant impact on the rupee.

It will strengthen the Indian rupee. The imposition of taxes will boost the rupee's typical future exchange rate, hence increasing the rupee's usual appreciation. It will cause a rise in the interest rate on rupee-denominated assets, resultingly, interest curve would shift to one side, and the rupee exchange rate would rise in parallel.