Trump Enforces Reciprocal Tariff On Goods Exported From India

US President Donald Trump has announced reciprocal tariffs of 27 per cent on India that has sent the government in a huddle to study its implications to help affected sectors and also identify possible opportunities flowing from the new tariff order.

New Delhi is also looking at “expeditious conclusion” of the India-US bilateral trade agreement (BTA) negotiations that is set to deliver the first tranche of results by September this year, according to a Commerce Department statement.

Indian exporters across sectors, such as textiles, chemicals, agricultural products, gems & jewellery, machinery, electronics, and electricals, are worried about the steep tariffs affecting future prospects. But much higher rates of reciprocal tariffs on competing countries such as China, Vietnam, Bangladesh and Cambodia, is a reason for hope as it gives India the competitive edge in some areas.

India is hopeful that the reciprocal tariff issue will be sorted out in the BTA discussions through “carve-outs” for the country and a mutually beneficial outcome will emerge with India offering greater market access to the US in sectors of its interest such as automobiles, motorbikes, alcohol and at least some agricultural items, another source said. Since US is the largest trading partner and export destination for India, with exports of goods at $77.51 billion and imports at $42.19 billion in FY24, it does not want to get into a tariff fight with by taking retaliatory actions.

Trump’s `Liberation Day’ tariff announcement, made from the White House Rose Garden, also included confirmation of a 25 per cent levy on vehicles not assembled in the US, and on auto components.

India is subject to a baseline tariff of 10 per cent between April 5-8. Then the tariff will rise to a country-specific 27 per cent starting April 9. The exempted sectors include pharmaceuticals, semiconductors, copper, and energy products.

Trump said that through the imposition of reciprocal tariffs, he aims to promote manufacturing in the US and provide Americans a level playing field ending “years of unfair trade practices”. The reciprocal tariffs have not just been calculated on the basis of the tariffs imposed by the partner countries but also seems to have factored in the trade deficits US has with these countries. Apart from tariff reduction, the US has also been pressuring India to address non-tariff barriers such as import restrictions, quality control and sanitary & phytosanitary norms.

The BTA being negotiated by the two countries is expected to more than double bilateral trade to $500 billion by 2030. However, domestic stock markets showed resilience even as global stock markets tumbled sharply. The BSE Sensex closed at 76,295.36, down 322.08 points or 0.42 per cent from its previous close, while the Nifty50 settled at 23,250.10, losing 82.25 points or 0.35 per cent.