The talks between Prime Minister Narendra Modi and US President Donald Trump that aim to deepen bilateral trade relations and doubling it to $500 billion by 2030 is being welcomed by industry, but experts believe that the finer details of Trump’s talks on reciprocal tariffs will have to be looked into before assessing its exact impact. For now, however, there may not be too much impact on India.
Prime Minister Modi and Trump have set a new goal for bilateral trade — “Mission 500” — aiming to more than double total bilateral trade to $500 billion by 2030. “Recognising that this level of ambition would require new, fair-trade terms, the leaders announced plans to negotiate the first tranche of a mutually beneficial, multi-sector Bilateral Trade Agreement (BTA) by fall of 2025,” said the India-US Joint Statement released after the visit of Prime Minister Modi to the US where he held talks with Trump.
While the US has also welcomed India’s recent rationalisation of customs duty rates in the Union Budget, Trump has also announced that US trading partners would now face reciprocal tariffs for “fair free reciprocal trade” that would address its huge trade deficit.
Ajay Srivastava, Founder of think tank Global Trade Research Initiative, said that reciprocal tariffs may not hurt India much. “Given the differences in the export profiles of the two countries, reciprocal tariffs may not have a significant impact. For example, if the US charges 50% reciprocal tariffs on Indian pistachios because India charges the same, India is happy as it does not export pistachios,” he pointed out. Additionally, for 75% value of US exports to India, the average tariff is less than 5%. He also noted that it is not clear if the reciprocal tariff applies to specific products or entire sectors.
Besides, whether reciprocal tariffs include only customs duties or also a plethora of other tax and regulatory aspects is also not certain.
Abhijit Das, former head of the Centre for WTO Studies at Indian Institute of Foreign Trade, noted that it is very difficult to quantify the impact of the reciprocal tariffs announced by the US, but it will likely be negative. “Reciprocal tariffs don’t include just the import duties but also several other aspects including value added tax, non-tariff barriers, government procurement, lack of protection of intellectual property rights and exchange rate policies. It is a very comprehensive strategy and the attempt by the US is to get countries to change not only their customs duties but also several other policies,” he underlined.
A White House article on Reciprocal Trade and Tariffs has said that the Administration will work to counter non-reciprocal trading arrangements with trading partners by determining the equivalent of a reciprocal tariff with respect to each foreign trading partner. This would include tariffs, “unfair, discriminatory, or extraterritorial taxes” including value added tax, costs to United States businesses, workers, and consumers arising from nontariff barriers or measures and unfair or harmful acts as well as policies around exchange rates.
Experts caution that India will have to await the fine print of the US decision on reciprocal tariffs to gauge the exact impact. “In the new Trump era, India may wait to see the US decision in April on reciprocal tariffs and then respond in equal measures as we did in June 2019,” Srivastava said.
The US is India’s top trading partner, with more than $190 billion in trade. It is also one of the largest export markets for Indian goods.
Trade and industry, however, remains hopeful of more opportunities with the decision on a bilateral trade agreement. Federation of Indian Export Organisations (FIEO) President Ashwani Kumar emphasised that the visit marked a significant step towards deeper economic cooperation, expanding trade, boosting investments, and solidifying strategic ties between the two nations. “With the US emerging as one of India’s largest trading partners, these developments will provide Indian exporters with new opportunities. The focus on technology, defence, and green energy will particularly benefit India’s export sectors and enhance global competitiveness,” said a statement by FIEO.
ASSOCHAM President Sanjay Nayar said the ambitious target of $500 billion bilateral trade by 2030 is eminently achievable while agreement on negotiation for Bilateral Trade Agreement would pave way for new trade and investment opportunities between the two nations.