Prime Minister Narendra Modi and U.S. President Donald Trump shake hands as they deliver a joint press statement after their meeting at the White House, in Washington, DC on Thursday, February 13, 2025
| Photo Credit: Reuters

The U.S. government’s move to impose reciprocal tariffs to match higher duties levied by its trading partners is not likely to hurt India much as there are differences in the export profiles of the two countries, economic think tank GTRI said on Friday (February 14, 2025).

Citing an example, the Global Trade Research Initiative (GTRI) said that if the U.S. charges 50% reciprocal tariffs on Indian pistachios because India charges the same, India is happy as it does not export pistachios.

Additionally, for 75% value of the U.S. exports to India, the average tariff is less than 5%, GTRI Founder Ajay Srivastava said.

In contrast, India faces high U.S. tariffs on many labour-intensive goods like textiles, garments, and footwear, ranging between 15-35% on several products, he added.

“Given the differences in the export profiles of the two countries, reciprocal tariffs may not have a significant 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,” Mr. Srivastava said.

After talks with Prime Minister Narendra Modi in Washington, U.S. President Donald Trump announced that India will buy more oil, gas and military hardware from America to bring down the trade deficit but asserted that Washington will not spare New Delhi from reciprocal tariffs.

On the trade deal, he said though the details are not yet clear, it could be a limited deal on reciprocal tariffs, expected to be announced in April.

The U.S. has already announced non-reciprocal tariffs of 25% on steel and aluminium.

“This is also not the best time for an FTA (free trade agreement) or full trade agreement as the U.S. does not respect FTAs. An example is how the Trump administration has imposed tariffs on Mexico and Canada on steel and aluminium in violation of USMCA (US Mexico Canada) provisions,” Mr. Srivastava said.

The GTRI also said that the U.S. is not clear if the reciprocal tariff applies to specific products or entire sectors.

A White House fact sheet dated February 13 said, “The U.S. average applied Most Favored Nation (MFN) tariff on agricultural goods is 5%. But India’s average applied MFN tariff is 39%. India also charges a 100% tariff on U.S. motorcycles, while we only charge a 2.4% tariff on Indian motorcycles.” On this, Mr. Srivastava said that the U.S. must choose a criteria – product or sector – for transparent decision making, else all the US efforts on MFN tariff cuts will end up benefiting China as China is the largest global supplier of industrial goods.

During April-November 2024-25, the U.S. was the second largest trading partner of India with $82.52 billion bilateral trade in goods ($52.89 billion worth of exports, $29.63 billion of imports and $23.26 billion trade surplus).

During 2021-24, America was the largest trading partner of India. The U.S. is one of the few countries with which India has a trade surplus.

In 2023-24, the U.S. was the largest trading partner of India with $119.71 billion bilateral trade in goods ($77.51 billion worth of exports, $42.19 billion of imports and $35.31 billion trade surplus).

While India’s peak custom duty rate is now 70%, the import duties on the top 30 items exported by the U.S. to India — led by crude petroleum, coking coal, aeroplanes, and liquefied natural gas — are minimal, in the range of zero to 7.5%, the Central Board of Indirect Taxes and Customs chairman Sanjay Kumar Agarwal said. Photo: PIB

The latest round of import tariff revisions announced in the Budget have done away with the peak rates of 150%, 125%, and 100% which applied to just five items, but had created “bad optics” about India’s tariff structure, top officials told The Hindu. Such high tariffs have led to criticism of the sort levelled by U.S. President Donald Trump, who has often clubbed India with China as a “tariff abuser”,

While India’s peak custom duty rate is now 70%, the import duties on the top 30 items exported by the U.S. to India — led by crude petroleum, coking coal, aeroplanes, and liquefied natural gas — are minimal, in the range of zero to 7.5%, the Central Board of Indirect Taxes and Customs chairman Sanjay Kumar Agarwal said in an interview with The Hindu.

The rationalisation of tariff rates, bringing them down from 15 to eight slabs including the zero rate, and lowering the rates, should help “correct” the bad “optics” and send a clear signal to the world that “we are not a high-tariff country”, Mr. Agarwal emphasised.

Fact sheet on imports from U.S.

Even as Mr. Trump has notified higher tariffs on imports from Canada, China, and Mexico, Indian officials are learnt to have readied a fact-sheet laying out the country’s tariffs on key U.S. products, some of which have been slashed further in the Budget. This could be presented to American counterparts through diplomatic channels.

Finance Secretary Tuhin Kanta Pandey, who also leads the Department of Revenue, asserted that the government was “autonomously reviewing” India’s customs duty structure to rationalise it, as announced in the last Budget. “But of course, we can always present the facts. Their highest importables are all on lower rates… Even aeroplanes are at 2.5% plus 0.5%, and these are zero-rated if they are imported by scheduled operators,” he pointed out.

‘Not a high tariff nation’

“We have finished the peak rates of 150%, 125%, 100%, 40%, 35%, 30%, 25%. Those rate slabs are gone. It’s an indication to both — our industry, as well as to the world — that we are not a high tariff nation. Our average tariff has come down to 10.6% now from about 11.55% earlier,” he said.

“India is very friendly in terms of industrial goods tariffs. We have even reduced the tariffs on motorcycles to make it 30% for bikes with 1600 cc or bigger engines,” Mr. Pandey pointed out.

New Delhi:

Donald Trump on Tuesday denounced India, China, and Brazil as “tremendous tariff-maker(s)” and said his government would not allow the three to continue down this path, declaring, “… we’re not going to let that happen any longer because we’re going to put America first.”

Speaking to House Republicans at a Florida retreat, the United States President acknowledged the three countries – founding members of the increasingly influential BRICS bloc – were acting in their respective best interests, but seemed also to insist “… they mean us harm”.

“We’re going to put tariffs on outside countries and people that really mean harm to us. Well… they mean us harm, but they basically want to make their country good. China is a tremendous tariff-maker, and India, Brazil, and so many other countries. (But) we’re not going to let that happen any longer… because we’re going to put America first,” Trump declared to cheers.

The comments came shortly after it emerged Prime Minister Narendra Modi is likely to meet Trump in Washington, as early as next month. The two leaders spoke on the phone Monday night; it is unclear if tariffs were on the agenda, but New Delhi’s view on ‘illegal immigrants was.

READ | “Mutually Beneficial, Trusted Partnership”: Modi-Trump Phone Call

However, the US President’s view on India and tariffs is seen by many as problematic, given he slammed Delhi – the US’ largest trading partner – as a “very big abuser” during his campaign.

Trump also spoke of a “very fair system” to “very quickly” make the US “richer and more powerful”, repeating what he said after he was sworn in last week; he said, “Instead of taxing our citizens to enrich other countries… we will tariff and tax foreign countries to enrich our citizens.”

And if foreign companies – Indian, Chinese, Brazilian, or others – want to avoid these high tariffs, Trump said, they would have to “build your plant right here in America”.

He also told the House Republicans of plans to slap tariffs on steel, aluminium, copper, and other materials required by the American military. “We have to bring production back… There was a time we made a ship a day. Now we can’t… We don’t know what the hell we’re doing.”

READ | “America First”: Trump Vows Tariffs On Nations That “Mean Harm” To US

High tariffs on goods imported into the US – specifically from China – were a frequent refrain during Trump’s campaign. He also warned of “100 per cent tariffs” on BRICS nations to (in his mind) shut down talk of member-nations not using the dollar as the common currency.

Trump’s tariffs tirade has a clear economic agenda, questionable though the means may be, and that is to jumpstart manufacturing in the US. By marking up the prices of key commodities like steel, semi-conductors, medicines, etc., he is hoping to do just that. “Under the ‘America First’ economic model, as tariffs on other countries go up, taxes on American workers and businesses will come down and massive numbers of jobs and factories will come home.”

READ | How Donald Trump Is Using “Tariffs” As A Weapon

The other perspective is ‘tariff as a weapon’, a point-of-view underlined by Trump’s clash with Colombia over deportations. The South American country initially refused to accept a plane loaded with ‘illegal immigrants’, only then to face massive 25 per cent tariffs and a trade war.

Colombian President Gustavo Petro eventually relented; he had to, of course.

READ | “Cooperate Or…”: In Colombia Face-off, Trump’s Strong Message

White House Spokeswoman Karoline Leavitt was quick to claim a ‘victory’, saying: “Today’s events make clear to the world that America is respected again”, and Trump echoed that sentiment Monday, telling reporters “it serves the world well to look at” the Colombia spat.

With input from agencies

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Washington DC:

With just weeks to US President-elect Donald Trump’s Inauguration, his aides are reportedly exploring plans to translate the Republican leader’s campaign pledges of imposing universal tariffs on imports from overseas into policy. In the run-up to the Presidential polls, Donald Trump has called for “universal” tariffs as high as 10 or 20 per cent on all imports to the United States, and a 60 per cent levy on goods from China.

However, the Republican leader’s aides believe that certain adjustments might need to be made in the original plan to accommodate political or economic realities, CNN reported quoting three sources familiar with the development.

Per the report, the Trump team is trying to come up with plans that cut closely to the blanket tariffs the President-elect had proposed as a candidate. They are reportedly exploring enacting tariffs on a subset of critical industries – either in advance of or alongside a broader tariff program – to highlight trade imbalances and spur US manufacturing activity.

Sources said that the discussion is still active on the policy as no final decisions have been made yet. 

Earlier, a report in The Washington Post said that Trump’s team was making a big shift from his plans during the 2024 presidential campaign by exploring tariff plans that would be applied to every country but only cover critical imports. 

However, the President-elect took offence to the article’s description that the move would pare back his campaign pledge. “The story in the Washington Post, quoting so-called anonymous sources, which don’t exist, incorrectly states that my tariff policy will be pared back. That is wrong,” he wrote on his Truth Social platform on Monday.

If put into effect, the tariff plan of Trump’s team could lead to one of the biggest challenges to the global trade order in decades. It could invite retaliation from the rest of the world and drive prices up for consumers and businesses alike.

However, his economic advisers reportedly view this effort as necessary to bring manufacturing jobs back to the US economy. They are weighing options about how to move forward with something that resembles Trump’s original proposal but would limit the impact on the stock market and consumer prices. 

Even before implementation, Trump’s plans are reportedly facing resistance in his own camp, with incoming Treasury secretary, hedge fund investor Scott Bessent, “not entirely sold” on the idea of universal tariffs on all goods, CNN reported quoting people who have spoken with him.

Trump’s son-in-law, Jared Kushner, who worked on international economic policy during the first term, recently said that there was “probably more work that needs to be done” on tariffs on China.

However, Howard Lutnick, Trump’s pick for Commerce secretary, has reportedly supported using tariffs as a negotiating tactic and his confidante and former economic adviser Larry Kudlow has also suggested that tariffs could offset the cost of tax cuts.