The US President Donald Trump announced 27 per cent reciprocal tariffs on India mentioning that it is a 'discounted' rate when compared to 52 per cent tariffs imposed by India on American goods as the US government aims to reduce the country's trade deficit and boost manufacturing.
Even though Trump mentioned about a discounted reciprocal tariff of 26 per cent tariff on India during his address, according to the White House documents, there will be a 27 per cent duty on India, reported PTI.
The move is expected to impact India's exports to the US. However, experts say that India is better placed than its competitors who also face increased levies.
President Trump, in a historic measure to counter higher duties on American products imposed globally, announced reciprocal tariffs on about 60 countries on April 2 (ET).
India is already negotiating a bilateral trade agreement with the US. The two countries are aiming to finalise the first phase of the pact by fall (September-October) of this year.
US Imposes 27 Percent Tariffs On India
As he announced the tariffs, he held up a chart that showed the tariffs that countries such as India, China, the UK, and the European Union charge, along with the reciprocal tariffs that these countries will now have to pay.
The chart indicated that India charged 52 per cent tariffs, including currency manipulation and trade barriers, and America would now charge India a discounted reciprocal tariff of 26 per cent. But according to the White House documents, there will be a 27 per cent duty on India.
"India, very, very tough. Very, very tough. The prime minister just left. He's a great friend of mine, but I said, you're a friend of mine, but you're not treating us right. They charge us 52 per cent. You have to understand, we charge them almost nothing for years and years and decades, and it was only seven years ago, when I came in, that we started with China," Trump said.
However, pharmaceuticals and other essential items are exempted from the increased import duty.
Reactions
Describing the tariffs as a "mixed bag and not a set back", an official in India said the commerce ministry is analysing the impact of 27 per cent reciprocal tariffs imposed by the US on India.
According to the official, the universal 10 per cent tariffs will come into effect on all imports into the US from April 5 and from April 10, 27 per cent duty will come into play.
Exporters' body FIEO stated that the duties on India will undoubtedly affect domestic players but early conclusion of the trade agreement would provide relief from these tariffs.
"We have to assess the impact, but looking at the reciprocal tariffs imposed on other countries, we are in a lower band. We are much better placed compared to our key competitors such as Vietnam, China, Indonesia, Myanmar, etc. We will definitely be affected by the tariffs, but we are much better placed than many others," Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai told PTI.
Indian Pharmaceutical Alliance (IPA) Secretary General Sudarshan Jain said that the US Administration has exempted pharmaceuticals from reciprocal tariffs underscoring the critical role played by generic medicines globally.
The decision underscores the critical role of cost-effective, life-saving generic medicines in public health, economic stability, and national security, Jain said in a statement. India and the US share a strong and growing bilateral trade relationship, with a shared vision to double trade to USD 500 billion under the Mission 500 initiative, Jain stated.
Automotive Component Manufacturers Association of India on Thursday said it is hopeful that the ongoing bilateral trade talks between India and the US will help mitigate the impacts of President Donald Trump's tariff orders and lead to a balanced resolution that benefits both economies.
Meanwhile, Indian-American members of the US Congress and the diaspora community criticised the reciprocal tariffs imposed by President Donald Trump, calling them "reckless and self-destructive”, urging leaders in both countries to engage in dialogue to address these challenges.
Congressman Raja Krishnamoorthi said Trump's blanket tariffs are a tax on working families so that he can cut taxes for the wealthiest Americans. “These latest so-called 'Liberation Day' tariffs are reckless and self-destructive, inflicting financial pain on Illinois at a time when people are already struggling to keep their small businesses afloat and put food on the table.”
Congressman Ro Khanna said in a video posted on his social media handle that the tariffs announcement “isn't an April Fool's joke." He added that, "Trump is literally trying to destroy our economy with his Liberation Day tariffs slapped overnight, no strategy, no consultation, no congressional input. What does this mean? Prices are going to go up. Prices for cars are going up. Prices for groceries are going up. Prices for home repairs and home building are going up, and there's total uncertainty,” Khanna said.
Indian-American Congressman Dr Ami Bera said in a post on X “Let me be clear: these tariffs will not make America wealthy again. These costs will be passed onto YOU— the American consumer. This is not a tax cut. This is a tax hike.”
Impact On Indian Economy
The rupee slumped 26 paise to 85.78 against the US dollar in early trade on Thursday.
Forex traders said, Trump's reciprocal tariffs sent shockwaves through the market, and investors sought for safe haven. At the interbank foreign exchange, the rupee opened at 85.77 against the greenback, then lost ground and touched 85.78, down 26 paise from its previous close.
The Indian rupee opened weak on risk aversion, as India was subjected to 27 per cent of tariffs, which was unexpected, said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.
Agricultural economist Ashok Gulati said that the tariffs imposed by Donald Trump will have limited impact on key agricultural exports such as seafood and rice when compared to higher duties imposed on the regional competitors. "We should not look at the tariff increase in absolute terms, but see relative tariff increases with our competitors," Gulati told PTI.
Gulati, currently chair professor for agriculture at the Indian Council for Research on International Economic Relations (ICRIER), suggested that India could potentially gain market share in spaces vacated by higher-taxed competitors.
For seafood exports, particularly shrimp, Gulati explained that India's relative tariff advantage combined with shrimp's small share in the overall US food expenditure means the demand is unlikely to shrink significantly.
The general secretary of Shrimp Feed Manufacturers Association of India, Gulrej Alam, said India is a major exporter of shrimp to the US, with about half of the country's total annual export of 9 lakh tonnes shipped there. "There will be a little setback in the short term because of a lower tariff of 10 per cent imposed on Ecuador, which is also one of the major shrimp exporters to America," Alam said, adding that this will be a cause of concern for Indian shrimp production.
Similarly, for rice exports, where current US tariffs are 9 per cent, India maintains a competitive edge against Vietnam and Thailand despite the increase to 26 per cent. Vijay Sethia, a former president of the All India Rice Exporters Association, said India exports 250,000 to 300,000 tonnes of rice annually to the US.
"The 26 per cent tariff on all varieties of rice will definitely slow down our exports in the short term but will capture its space in the long term," Sethia said, adding that the duty hike will ultimately hurt the American consumers.
History Of India-US Trade
From 2021-22 to 2023-24, the US was India's largest trading partner. The US accounts for about 18 per cent of India's total goods exports, 6.22 per cent in imports, and 10.73 per cent in bilateral trade.
With America, India had a trade surplus (the difference between imports and exports) of USD 35.32 billion in goods in 2023-24. This was USD 27.7 billion in 2022-23, USD 32.85 billion in 2021-22, USD 22.73 billion in 2020-21, and USD 17.26 billion in 2019-20.
In 2024, India's main exports to the US included drug formulations and biologicals (USD 8.1 billion), telecom instruments (USD 6.5 billion), precious and semi-precious stones (USD 5.3 billion), petroleum products (USD 4.1 billion), gold and other precious metal jewellery (USD 3.2 billion), ready-made garments of cotton, including accessories (USD 2.8 billion), and products of iron and steel (USD 2.7 billion).
Imports included crude oil (USD 4.5 billion), petroleum products (USD 3.6 billion), coal, coke (USD 3.4 billion), cut and polished diamonds (USD 2.6 billion), electric machinery (USD 1.4 billion), aircraft, spacecraft and parts (USD 1.3 billion), and gold (USD 1.3 billion).
