lodibet Trump Approves Reciprocating Tariffs With US Trading Partners; How Will It Impact India?

PM Modi meets Donald Trump Photo: @narendramodi on X via PTI PM Modi meets Donald Trump Photo: @narendramodi on X via PTI

Deepening the fear of a global trade warlodibet, President Donald Trump has announced his plan to reciprocate tariffs with every country they trade with which is to increase US tariffs to match the tax rates that other countries charge on imports as he hopes to eliminate any trade imbalances.

The announcement came just before Trump's bilateral meeting with Prime Minister Narendra Modi at the Oval Office In White House he said that India will buy more oil, gas and military hardware from America to bring down the trade deficit while asserting that Washington will not spare New Delhi from reciprocal tariffs.

During 2021-24, the US was the largest trading partner of India. And the impact of Trump’s reciprocal tariffs on India will depend on the US’ adjustments to duties and India’s response. Trump during a media interaction expressed that "India is a very hard place to do business because of tariffs". The hike in tariffs may lead to a retaliatory tariff strategy from India's side in the near future.

Trump On Tariff Reciprocation & Trade With India

Donald Trump signing the proclamation on Thursday in the Oval Office said, "I've decided for purposes of fairness that I will charge a reciprocal tariff."

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"It's fair to all. No other country can complain," he added.

Trump was further asked if SpaceX CEO Elon Musk, who met with PM Modi earlier in the day, spoke with the prime minister as a government worker or a tech magnate, amid concerns the meeting was related to the billionaire's business dealings.

In his reply, Trump said, “India is a very hard place to do business because of the tariffs. They have the highest tariffs, just about in the world, and it's a hard place to do business... No, I would imagine he (Musk) met possibly because, you know, he's running a company.”

Soon after the announcement, Trump held bilateral talks with PM Modi and they decided upon bringing mega trade deals with India soon.

What Are Tariffs?

In international trade terms, tariffs or customs duties or taxes are imposed on the import of goods. The importer has to pay this duty to the government. Normally, companies pass on these taxes to end users.

For example, if a company is importing a product 'X', having 10 per cent customs duty, valued at Rs 100 from other country, the cost of the product will go up to Rs 110.

These duties, which are indirect taxes, are a source of revenue for a country.

The reciprocation of tariffs are imposed by countries to match hike in duties or high tariffs by trading partners. For example when in 2018, the US imposed higher duties on certain steel and aluminium products, India retaliated by raising tariffs on 29 US products, recovering equivalent revenue.

The US is facing huge trade imbalances with countries, especially with China. With India, the US has a trade deficit of USD 35.31 billion in goods in 2023-24. To bridge this gap, the US President is imposing these duties.

Trump has announced a 25 per cent duty on all steel and aluminium imports. It will come into effect from March 12.

Founder of hedge fund Spencer Hankimian in a post on X drew up a list of countries and what US could gain from tariff reciprocation.

He said, "I ran the math on the gain our country could theoretically make by imposing reciprocal tariffs. Minimal. Here are our 15 largest trading partners,PESO99 official their trade weighted tariff on our products, the difference between our rate and their rate, and our annual trade deficit/surplus with them."

I ran the math on the gain our country could theoretically make by imposing reciprocal tariffs.Minimal.Here are our 15 largest trading partners, their trade weighted tariff on our products, the difference between our rate and their rate, and our annual trade deficit/surplus… pic.twitter.com/i15hga9Nyw

— Spencer Hakimian (@SpencerHakimian) February 13, 2025 Imapct on India

History

During April-November 2024-25, the bilateral trade in goods between the two countries stood at USD 82.52 billion (USD 52.89 billion exports, USD 29.63 imports). The trade gap was USD 23.26 billion which is in the favour of India.

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.

Impact

The impact of Trump’s reciprocal tariffs on India will depend on the US’s adjustments to duties and India’s response.

Several Indian industries could be affected, such as pharmaceuticals, textiles, information technology, and steel. India is a major exporter of generic drugs, textiles, and IT services to the US. Higher tariffs could reduce competitiveness for these sectors.

India, the most successful team in the competition, now have five titles, including back-to-back triumphs in 2023 and 2024. The victory adds to their bronze medal secured at the Paris Olympic Games last month.

Additionally, small steelmakers in India could face stiff competition due to an increase in imports caused by Trump’s tariff hikes, putting them at risk of being driven out of business.

India has a significant trade surplus of about $50 billion with the US, which Trump has repeatedly criticized, claiming it reflects unfair trade practices.

To ease tensions, India has already reduced tariffs on Harley-Davidson motorcycles and removed retaliatory tariffs on US almonds and other products. Despite these efforts, Trump’s new policies could push India into making more concessions or face the risk of losing access to the US market.

According to a report on Times Of India, in response to higher US tariffs, India may retaliate with counter-tariffs on American products. This could target US agricultural goods, energy exports, and aerospace and defense deals, such as Boeing aircraft and military equipment.

India doesn't have a history of escalating trade wars with USA but if Trump’s tariffs negatively impact Indian businesses a new retaliation strategy may come up in future.

Meanwhilelodibet, the trader experts are of the opinion that duties imposed by the US are violative of these norms.