Now that Trump has made no exceptions and gone ahead with reciprocal tariff policy, India will have to gear up for the impact
India’s hopes of securing a trade deal with America to avoid high tariffs have been dashed with US President Donald Trump announcing the implementation of reciprocal tariffs from April 2, a move that could potentially disrupt the global trade dynamics. While addressing a joint session of the US Congress, a combative Trump spared none in arguing that America has been ‘ripped off for decades by nearly every country on earth’ and asserted that his administration would not ‘let that happen any longer’. Significantly, he clubbed India along with Mexico, China, Brazil and the European Union for pursuing unfair trade policies. The reciprocal tariffs — meaning the US will impose tariffs equivalent to those charged by other countries — fit into Trump’s much-touted ‘America First’ narrative and are expected to generate significant revenue for the US and create jobs. Trump repeated his longstanding position that the US must counter what he sees as inequitable trade policies and particularly singled out India for imposing ‘higher than 100 per cent tariffs on American automobiles’. The announcement comes just weeks after Prime Minister Narendra Modi’s visit to the US raised hopes among Indian industry that a trade deal with America could help in warding off the threat of sweeping tariffs in exchange for market access for US products in India. To prepare the ground for this, India had proactively slashed tariffs on a number of American imported items including high-end motorcycles and bourbon whiskey. There are also plans to reduce duties for automobiles, some agricultural products, chemicals, critical pharmaceuticals, certain medical devices and electronics.
The idea is to forge a trade agreement with the US to shield India from high duties. Now that Trump has made no exceptions and gone ahead with the announcement of his reciprocal tariff policy, India will have to gear up for the impact. While details of the tariffs remain unclear, experts predict that these measures could disproportionately affect India, given the nation’s higher-than-average tariffs on several categories of US imports. While India is open to tariff cuts on industrial products, including automobiles and chemicals, it is resisting pressure from the US to reduce tariffs on agricultural products, on the ground that such a move would impact millions of poor farmers. Experts say that chemicals, metal products and jewellery, followed by automobiles, pharmaceuticals and food products could be the most vulnerable sectors to the US reciprocal tariffs. If America expands such reciprocal tariffs to a broader range of farm products, India’s agricultural and food exports, including shrimp and dairy, would be among the hardest hit. There is no doubt that the uncertainty surrounding global trade, in the wake of the Trump administration’s disruptive moves, will impact India’s economy. Earlier, the US imposed sweeping levies on imports from Mexico, Canada and China, citing issues such as illegal immigration and drug trafficking. The move has drawn widespread condemnation from international leaders.
