Donald Trump’s reciprocal tariff: How US and Indian tariff rates have evolved? What 15% tariff mean for future trade?

President Donald Trump plans to impose reciprocal tariffs on trading partners that impose duties on US goods. According to Trump, there is an imbalance in trade as the US has an open economy, while its trading partners block US exports through tariffs. Hence, “Reciprocal trade will finally correct that imbalance," a White House statement quoted Trump.

Possibility of reciprocal tariffs on India

Trump specifically mentioned the traffic structure in India and said, “India has more tariffs than nearly any other country” confirming the possibility of levying reciprocal tariffs on Indian goods.

"And so we are being reciprocal with India. Whatever India charges, we charge them. So, frankly, it no longer matters to us that much, what they charge. I had discussions with India in the first term about the fact that their tariffs were very high, and I was unable to get a concession," he said.

The tariff structure between the US and India has evolved over the years according to changing economic policies and government priorities.

Tariffs imposed by the US on Indian exports have largely remained stable, while tariffs levied by India on US exports have been relatively dynamic.

Here's a look at how US and Indian tariff rates have evolved over the years: 

Tariff rate imposed by the US on Indian goods

(Source: SBI Research)

In 2018, the US tariff rate on Indian exports was 2.72%, which has increased over the years. Next year, the tariff rate rose to 3.84%, peaking at 3.91% in 2021 and declining to 3.83% in 2022, according to data cited in an SBI Research report titled, ‘Collateral Benefits: Ind-US Trade Set To Transcend New Boundaries.’

Tariff rate imposed by India on US goods

(Source: SBI Research)

Meanwhile, India has imposed significantly higher tariffs on US exports. In 2018, the tariff rate on US exports was 11.59%. It rose to 13.42% in 2019, while it was reduced to 12.22% in 2020 during the pandemic. This rate increased slightly to 12.52% in 2021. In 2022, the tariff rate peaked at 15.30%.

What would a reciprocal tariff of 15% mean for India?

If the US plans to impose a retaliatory tariff of nearly 15% on Indian goods, three times the current rate, there is a possibility of a fall in Indian exports, according to the SBI Research report. It is estimated that every 1% rise in tariffs will lead to a 0.5 % decline in exports. Indian exports will also be impacted by exchange rate movements.

Taking into account the exchange rate movement, the report estimates that if the US raises the tariffs to 15%, Indian exports will fall by 3%. However, the number may vary across sectors.