NEW DELHI: Minister of State for Finance Pankaj Chaudhary on Thursday said India is assessing the India evaluating impact of US reciprocal tariff imposed by the US and its impact on the country.
“For Donald Trump, it’s America first, but for Modi, it’s India first. We are assessing the impact of reciprocal tariffs imposed by the US,” he said on the sidelines of an event organised by Pension Fund Regulatory and Development Authority (PFRDA) in New Delhi.
The US has announced a 27 per cent reciprocal tariff on Indian goods, citing high import duties imposed by New Delhi on American products. The move, aimed at reducing the US trade deficit and boosting domestic manufacturing, is expected to significantly impact Indian exports.
While businesses in India brace for the fallout, experts suggest that the country is relatively better placed compared with its global competitors facing similar levies.
President Trump, in a historic trade measure, announced reciprocal tariffs on about 60 countries, marking a shift in US trade policy. “They (India) are charging us 52 per cent, and we charge almost nothing for years and years and decades,” Trump said, emphasising the need to level the playing field.
The US trade deficit with India currently stands at $46 billion dollars, and Trump has indicated that the new tariffs will remain in place until this imbalance is addressed.
India mulls cutting tariffs
The immediate impact of these tariffs is expected to be felt across key Indian sectors, particularly in automobiles, pharmaceuticals, and IT services. According to reports, India is considering slashing tariffs on $23 billion worth of US imports, including gems, jewellery, pharmaceuticals, and auto parts, to mitigate the impact. However, no agreement has been finalized yet.
Ankur Sharma, market analyst at VT Market, said that the announcement of reciprocal tariffs by President Donald Trump on India, Japan, and other nations is a significant development in global trade, particularly for emerging economies like India.
“These tariffs, aimed at counteracting high import duties imposed by these countries on US goods, will have both short-term and long-term implications for India’s economy, trade relations, and currency markets,” Sharma added.
Sanjay Nayar, president of Assocham, believes that India’s exposure to these tariffs is relatively lower compared with other affected nations. “Tariffs unveiled by President Trump would bring a major realignment in global trade and manufacturing value chains. India has been placed somewhere in the middle of the tariff rates at 27 per cent, which needs to be assessed for real impact.”
Net-net, it appears India’s export competitiveness to the US market stands far less impacted on a relative basis. Yet, India’s ndustry should make concerted efforts to increase export efficiency and value addition to mitigate the impact of these tariffs.
Auto sector to feel the heat
Analysts warn that Indian automakers will face additional pressure, as the new 27 per cent reciprocal tariff comes on top of the 25 per cent tariff already imposed by the US on imported automobiles and auto parts. The automotive tariff for cars and light trucks will take effect on April 2, while the tariff on auto parts will be enforced from May 3.
While India’s government assesses the implications of the new tariff regime, businesses across affected sectors are preparing for potential disruptions in trade dynamics. The coming weeks will be crucial in determining whether India and the US can negotiate any relief or adjustments to these tariffs.
