Trump’s Reciprocal Tariff: The impact of the proposed reciprocal tariffs by the United States on India will depend on how the policy is implemented–whether on a sectoral basis or a product-specific basis.
Trade experts suggest that there is still no clarity on the rules and conditions of this tariff policy, which has been widely discussed since US President Donald Trump first mentioned it. One of the key questions is whether the Reciprocal Tariffs will apply only to products where the US has an interest or if it will be a broader, bilateral measure.
This distinction is important, as it will determine how much India’s exports will be affected.For example, if the US raises tariffs on pistachios to 10 per cent to match India’s existing rate, it will have no impact on India since the country does not export pistachios.
President Trump’s tariffs fall into 3 buckets: (i) border security; (ii) geopolitics; and (iii) fairness. Each bucket by itself is negotiable, with tariffs just about leverage. Reciprocal tariffs fall into the fairness bucket and are negotiable. Only China is non-negotiable… pic.twitter.com/jC0k7I2Gq0
— Robin Brooks (@robin_j_brooks) February 14, 2025
This situation applies to several other products as well. Additionally, for 75 per cent of US exports to India, the average tariff is already below 5 per cent, which means that selectively increasing tariffs may not be an effective strategy for the US.
However, if the policy is applied sector-wide, the impact on India could be different. The U.S. currently imposes high tariffs of 15-35 per cent on Indian labor-intensive exports such as textiles, garments, and footwear.
Experts suggest that if India negotiates a tariff reduction agreement, it could benefit from lower U.S. tariffs on these products, making Indian exports more competitive.
Ajay Srivastava, Founder of the Global Trade Research Initiative, explained the situation to ANI, stating that if the U.S. applies tariffs based on individual products, India may not face major challenges since Indian and U.S. exports do not directly compete.He gave an example: “If the U.S. imposes high tariffs on Indian avocados in response to India’s tariffs, it won’t affect India, as India does not export avocados.
“However, he warned that if tariffs are imposed based on sector-wide averages, Indian exports could be impacted. While the U.S. does not export many agricultural products to India, it could increase tariffs on Indian agricultural exports based on an average calculation.
This move could harm multiple Indian products and force India to either cut its own tariffs or adopt retaliatory measures. He said “U.S. does not export many agricultural products to India, applying higher average tariffs on Indian agriculture exports could harm many products. This would force India to consider tariff cuts or a retaliation strategy. But, in labor-intensive industries, India might benefit from this approach”.
As the details of the reciprocal tariff policy remain uncertain, trade analysts believe that India will need to carefully assess its response to ensure minimal disruption to its exports while protecting its trade interests.