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Reciprocal Tariffs: US President Donald Trump this week announced reciprocal tariffs on its partners, including India, that impose higher levies on imports from the US; here’s all you need to know about the reciprocal tariffs, their impact on India.
India says it is looking at deepening trade ties with the US including by reducing tariff and non-tariff barriers under a bilateral trade agreement. (File Photo: Reuters)
Reciprocal Tariffs Meaning: As US President Donald Trump this week announced reciprocal tariffs on its partners, including India, that impose higher levies on imports from the US, India has been in negotiation with the US with Commerce Minister Piyush Goyal leading India’s trade negotiation there. What are reciprocal tariffs, and how can they impact India and its US exports if implemented? Here’s all you need to know:
Since assuming office on January 20, Trump on multiple occasions criticised India for higher tariffs and even described the country as a “tariff king” and ‘tariff abuser’.
So far, in a cautious reaction, India on Friday said it is looking at deepening trade ties with the US including by reducing tariff and non-tariff barriers under a bilateral trade agreement. In its Union budget for 2025-26, India announced its decision to lower tariffs on Bourbon whiskey, wines, and Electronic Vehicle (EV) segments.
What Are Reciprocal Tariffs?
Reciprocal tariffs are trade duties that one country imposes in response to tariffs placed on its goods by another country. In simple terms, if Country A charges extra taxes on goods from Country B, then Country B does the same in return. It’s like a “tit-for-tat” in trade to keep things fair.
In this case, Trump said India charges higher tariffs on American goods, thus America will also levy equal reciprocal tariffs.
Ross Maxwell, global strategy operations lead at VT Markets, said, “India effectively imposes 9.5% tariffs on US goods, compared to the 3% the US applies on Indian goods, which leaves India exposed to the threat of increased tariffs on their exports to the US.”
However, Justin Khoo, senior market analyst-APAC, VT Markets, said, “A 7 to 8.2 percentage point tariff differential between India and the US places Indian exports at risk of retaliatory tariffs.”
How Will These Tariffs Affect India, Its Exports To US?
India exports nearly $74 billion worth of goods to the US in 2024, which establishes the US as India’s biggest trading partner.
Justin Khoo, senior market analyst-APAC, VT Markets, said, “The implementation of these tariffs would impose annual financial losses between $2 billion and $7 billion on India while heavily affecting major export sectors such as chemicals, metals, jewellery, automobiles, pharmaceuticals, and food products.”
Higher tariffs on Indian products will decrease their competitive edge in the US market which will hit major labour-intensive sectors hard. Despite benefiting from the US-China trade war, the auto industry might encounter problems because of India’s substantial import taxes on American automobiles, he added.
Maxwell also said, “The reciprocal tariffs would particularly impact sectors such as the automobile industry, pharmaceuticals and textiles, all of which are significant to India’s export economy.”
There are also challenges facing the steel industry, and the Indian rupee has weakened against the USD in the past few months as some foreign investment has been pulled amid sell-off in equities, he added.
What The US Wants And What Does India Plan?
Commerce Minister Piyush Goyal is in the US to lead India’s trade negotiation efforts to engage with US officials to obtain concessions that could lessen the economic impact.
India on Friday said it is looking at deepening trade ties with the US including by reducing tariff and non-tariff barriers through a bilateral trade deal.
External Affairs Ministry spokesperson Randhir Jaiswal on Friday said that during Prime Minister Narendra Modi’s visit to the US last month, both India and the US announced plans to negotiate a mutually beneficial, multi-sector Bilateral Trade Agreement (BTA).
US Commerce Secretary Howard Lutnick in an interaction with India Today TV said the US wants a more balanced trade relationship with India, emphasising the need for fairer trade policies.
“It’s time to take bold action—something grand that strengthens the India-US partnership on a larger scale… Rather than negotiating product by product, we need a comprehensive approach. Lowering India’s tariff policy toward America will open the door for India to seize an extraordinary opportunity and build a deeper relationship with us,” Litnick has said.
