Mint Primer | Will PM’s visit help India dodge Trump’s tariffs?

President Donald Trump has announced reciprocal tariffs to correct the US’s trade imbalance with other nations. During his US visit, Prime Minister Narendra Modi has committed to increasing bilateral trade and a new trade deal. Will that help India avoid tariffs? Mint explains:

How significant was PM Modi’s US trip?

Quite significant indeed. Both India and the US have committed to more than double bilateral trade to $500 billion by 2030. Steps are also being taken to conclude a trade deal by autumn this year. That apart, India has conveyed that it is looking to substantially enhance energy trade with the US, especially in oil and gas, to bridge the trade gap. Foreign secretary Vikram Misri has said that India will increase energy purchases from $15 billion last year to $25 billion in the near future. A proposal for a strategic petroleum reserve facility in the US is also under consideration.

What else has been agreed?

The US-India 123 Civil Nuclear Agreement will be fully operationalised. The US will also support India’s full membership at the International Energy Agency. India’s plan to amend the Atomic Energy Act and the Civil Liability for Nuclear Damage Act has paved the path for US companies to jointly develop and supply large and small modular nuclear reactors to India. Trump has said that US military sales will increase “by many billions” starting this year. India has been offered the most advanced F-35 fifth-generation military jet. Modi and Trump also promised to accelerate defence technology cooperation.

Has Trump announced reciprocal tariffs?

Hours before he met PM Modi, Trump announced plans for reciprocal tariffs starting April. They are aimed at correcting the long-standing trade imbalance and cutting down the large and persistent trade deficit the US has with its trade partners, including India. The US has had a trade deficit every year since 1975 and in 2024, it was more than $1 trillion.

How badly will India be impacted?

Standing beside Modi at the White House, Trump called Indian tariffs “unfair” and “a problem”. A White House fact sheet justifying the reciprocal tariffs said, “The US average applied most favoured nation (MFN) tariff on agricultural goods is 5%. But India’s average applied MFN tariff is 39%.” Nomura calculated that the weighted average effective tariff on US exports to India was 9.5%, while it is 3% for Indian exports to the US. Sectors that could be hit include food products, vegetables, pharma and textiles.

Can India avoid these tariffs?

India has proactively cut import duties on many items, including motorcycles and bourbon whisky. It has also committed to enhancing the bilateral trade and cutting down the trade imbalance through increased purchase of oil and gas. Defence purchases are also set to increase. A trade deal is also in the works. Despite all these, it is not clear if Trump would exempt India from the reciprocal tariffs. Experts say that a lot will depend on what India does and commits in the next few months to cut the deficit, which in 2024 was $46 billion.

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