US President Donald Trump, just hours before his scheduled meeting with Prime Minister Narendra Modi, announced the imposition of reciprocal tariffs, targeting countries that levy high duties on American imports. Given India’s historically high tariffs on US goods, it is expected to be among the nations most affected by Trump’s decision.
Trump has made it clear that the US will now charge the same level of tariffs on imported goods as other countries impose on American exports.
While speaking to reporters after signing the executive order, Donald Trump said that India was among the countries imposing the highest tariffs on American goods.
“India traditionally is the highest, just about the highest tariff country. They charge more tariffs than any other country,” he said.
“Whatever they charge us, we’re charging them back. It’s a simple, beautiful system-no overcharging, no undercharging,” he stated. India, Japan, and the European Union are expected to face increased scrutiny under this policy, with tariffs possibly coming into effect as early as April.
While the decision is being framed as a strategy to balance trade, experts believe it could lead to economic uncertainty. India, in particular, is preparing for potential trade challenges as Washington finalises the details of the new tariff system.
TARIFF HIKE IMPACT ON INDIA
India currently imposes an average weighted tariff of 9.5 per cent on US exports, significantly higher than the 3 per cent tariff the Americans apply to Indian goods. This disparity has made India a prime candidate for Trump’s reciprocal tariff strategy. Trump has previously criticised India as a “hard place to do business” due to these high duties.
The sectors most vulnerable to increased US tariffs include food products, textiles, clothing, electrical machinery, gems and jewellery, pharmaceuticals, and automobiles. India is now weighing its options, with reports suggesting that tariff cuts on over 30 products and increased imports of U.S. defence and energy goods could be considered as a way to ease trade tensions.
Global Trade Research Initiative (GTRI) Founder Ajay Srivastava, however, pointed out that for 75 per cent of US exports to India, the average tariff is below 5 per cent, which could limit the impact of reciprocal tariffs on trade relations. He suggested that India may adopt a “wait-and-watch” approach, similar to its response in 2019 when it implemented countermeasures against US tariff actions.
Between April and November 2024, the US was India’s second-largest trading partner, with bilateral trade totalling USD 82.52 billion. India exported USD 52.89 billion worth of goods to the US while importing USD 29.63 billion, resulting in a trade surplus of USD 23.26 billion in India’s favour. This surplus has been a point of contention, with Trump pushing for measures to reduce the trade gap.