US President Donald Trump’s decision to impose reciprocal tariffs on imports from India may have repercussion on multiple sectors in the country, impacting thousands of stakeholders and workers. The US President on February 13 announced his plans of imposing “fairness and reciprocity” in trade with India, with the Indian Prime Minister Narendra Modi on his side in a press conference in Washington DC.
According to Trump, the objective is increasing bilateral trade with India while bringing parity in tariff structures between the two major economies. “Whatever India charges, we charge them… Really, we want a certain level playing field,” he says in a joint press conference.
Latest data suggest, India has a positive trade balance against the US. Which means, India exported some $50 billion worth of goods more to the economic superpower in 2023 than it imported. As per the government, in 2023, India’s imports from the US stood at some $70 billion, while it exported $120 billion worth of goods and services to the US — totaling around $190 billion worth of trade between the two countries.
As per analysts at Nomura, emerging economies like India, apart from China and Thailand, have higher relative tariff rates on US exports and “are thus at risk of higher reciprocal tariffs”. In fact, India’s weighted average tariff rate (9.5%) against the US imports is the highest among prominent Asian economies, followed by China (7.1%), Thailand (6.2%) and Indonesia (4.2%).
By definition, reciprocal tariffs mean imposing the same tariff rate on imports from other countries as other countries impose on US exports. For instance, if India imposes a 25% tariff on US autos, then the US would impose a 25% tariff on imports of autos from India.
Reciprocal tariffs are a bigger risk for emerging Asian countries like India than developed Asian nations like Japan. India’s weighted average effective tariff on US exports stands at about 9.5%, compared to a 3% tariff rate on India’s exports to the US, as per Nomura.
According to Nomura, two sectors — agriculture and transportation — face greater risks. Outside of those, the other sectors with higher relative tariff rates especially in India are textiles, footwear and chemicals. Key exports from India to the US include, electrical/industrial machinery, gems & jewellery, pharmaceuticals, fuels, iron & steel, textiles, vehicles, apparels, and chemicals, among others, of which iron & steel and aluminum account for nearly 5.5% of the total.
“So far, India has been trying to avoid confrontation. In the recently announced budget, it reduced import duties on products across electronics and textiles sectors, and also high-end motorcycles. It is also proactively considering reducing tariffs on over 30 items, including luxury vehicles, solar cells and chemicals,” analysts at Nomura say.
According to analysts at CRISIL, tariffs may worsen India’s concerns. “A lower fiscal impulse — as the government plans to reduce its fiscal deficit — will weigh on growth. Exports face risks from intensifying tariff wars. Central banks are looking at higher risks to growth and inflation amid the global tariff war set off by the US,” they say.