What does Donald Trump’s tariff war mean for India-US Trade? Is there room for negotiation? We take a look…

Trump Tariff War: United States President Donald Trump has unveiled a comprehensive tariff policy, imposing at least a 10 per cent duty on nearly all goods entering the US. The White House said this was aimed at correcting trade imbalances and bolstering American industries.

Meanwhile, Donald Trump justified the move by citing “horrendous imbalances” in the trade sector that he claimed have weakened the country's “industrial base” and posed national security risks.

What Do Trump Tariffs Mean for India?

A total of 180 countries were hit by sweeping reciprocal tariffs on April 2, which Donald Trump called “Liberation Day”.

For India in particular, he announced a 26 per cent reciprocal tariff—half the rate India imposes on US imports—which is expected to impact trade between the two countries.

Notably, the 25 per cent tariff on automobile imports is also expected to hit Indian auto companies such as Tata Motors.

What Do Trump Tariffs Mean for India-US Trade?

Indian exports to the US in FY24 reached $77.5 billion, with the latter being our biggest destination (over 18 per cent of total value) for merchandise goods, according to a Hindustan Times report. Notably, India's imports from the US dropped to $42.2 billion in the same period, down 17 per cent, the HT report added.

It is this “imbalance” in trade that Donald Trump has taken aim at.

Brokerage firm Motilal Oswal told Livemint that India’s top exported items to the US are electronics (15.6 per cent of total exports to the US), gems and jewellery (11.5 per cent), pharma products (11 per cent), machinery for nuclear reactors (8.1 per cent) and refined petroleum products (5.5 per cent).

So, what is likely to happen? Global Trade Research Initiative co-founder Ajay Srivastava told HT that India should wait for a list of demands from the US before responding.

Notably, for its military and oil purchases, India has been diversifying from the US to buying from Russia and the United Arab Emirates (UAE), whose prices are much lower in comparison. Thus, choosing the US would require a significant reduction in costs.

Srivastava told the publication that the US should consider overall economic relations and not simply trade deficit before making ultimatums. He highlighted that India is an important market for US companies across sectors.

Notably, some experts speaking to Livemint felt that since Donald Trump announced reciprocal tariffs at only half the rate other countries impose on US products, there is “room for negotiation rather than retaliation”.

Trump Tariff War: What Was Announced?

• A 10 per cent tariff will be applied to all imports from all countries except those complying with the US-Mexico-Canada Agreement (USMCA).
• Goods from non-compliant USMCA nations will continue to face a 25 per cent tariff.
• This new tariff structure takes effect on Saturday at 12:01 AM ET — i.e. 12.01 am on April 5 local US time, which is 9.30 am IST the same day.
• Around 60 countries with significant trade surpluses against the US will be subject to reciprocal tariffs.
• These tariffs will be set at half the rate those nations charge on American goods and come into force on April 9 (Wednesday) at 12:01 AM ET — i.e. 9.30 am IST the same day.
• Further, to protect the US auto industry, the Trump administration will also impose a 25 per cent tariff on all foreign-made automobiles effective at midnight ET — i.e. 9.30 am IST today.