India prepares data proof to shield against Trump’s reciprocal tariffs

New Delhi: Even as India and the US agreed to boost bilateral trade to $500 billion by 2030 and work towards a trade deal that will reduce duties and improve market access, the issue of reciprocal tariffs hangs in balance.

US President Donald Trump has announced plans to levy the same level of tariffs on goods as charged by the exporting country if the latter's duties on similar products are high. To avoid such reciprocal tariffs, India is preparing data to show that most imports from the US into India have duties less than 10%, two officials aware of the development said.

An exhaustive list of products with their import duties is being prepared by the ministry of commerce along with the ministry of external affairs, and will be presented in the next round of trade talks with the US, the two officials cited ababoveove said on the condition of anonymity.

The talks are likely to be held before April, when the US is expected to bring out its final list of reciprocal tariffs across products and countries.

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“Most US products do not attract high tariffs in India, as the country has kept duties relatively low on key American exports,” the first official cited above said. “For instance, for the top 100 US exports to India, the average tariff is below 5%, reflecting a trade environment that facilitates the flow of goods between the two nations.”

“India’s tariffs are not as high as it is being projected,” said the second official. “It’s as per the global practice.”

Queries emailed to spokespersons of the Prime Minister’s Office, ministries of commerce and external affairs, and the secretaries of commerce and DPIIT (Department for Promotion of Industry and Internal Trade) remained unanswered till press time.

Modi-Trump handshake

The development comes in the backdrop of President Trump and Prime Minister Narendra Modi’s meeting in Washington on 13 February, where the two countries announced “Mission 500”, an intent to double bilateral trade to $500 billion by 2030.

A joint statement between the two countries, released by India’s ministry of external affairs, said the US and India will work to expand market access, reduce tariff and non-tariff barriers, and deepen supply chain integration across goods and services.

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In addition, several other moves came through in areas such as energy security including US-designed nuclear reactors, greater imports of oil and gas from the US to India, strategic defence cooperation, purchase of fighter aircraft, and partnerships in technology, among other things.

As per the joint statement, both the state heads announced plans to negotiate the first phase of a multi-sector bilateral trade agreement (BTA) by fall 2025, and committed to appointing senior representatives to drive the talks.

The US also welcomed India’s tariff reductions on bourbon, motorcycles, ICT products, metals, and improved market access for agricultural goods and medical devices. On the other hand, India acknowledged US efforts to boost exports of Indian mangoes and pomegranates, as per the joint statement.

However, in a factsheet on Fair and Reciprocal Tax signed by Trump before his meeting with Modi, Washington had highlighted tariff disparities, noting the US applies a 5% MFN (most-favoured nation) tariff on agricultural goods, while India’s is 39%. It also pointed out India’s 100% tariff on American motorcycles, compared to the US’s 2.4% tariff on Indian motorcycles, citing an imbalance in market access.

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After meeting Modi at the White House and calling him a friend, Trump, who had earlier labelled India a “tariff abuser”, repeated his complaints at a joint press conference about the country’s trade policies, calling its import duties “very unfair and strong”, and made it clear that India would not be spared from his tariff hikes on key trade partners.

“Whatever India charges, we charge them. So, frankly, it no longer matters to us that much what they charge,” Trump said at the joint press conference with Modi.

The background

After assuming office on 20 January, Trump made his first official tariff announcement, a part of his campaign promise, on 1 February by imposing a 25% tariff on Mexican and Canadian imports, a 10% duty on Canadian energy products, and a 10% increase in tariffs on Chinese imports, escalating trade tensions.

The announced tariffs on Mexico and Canada have been put on hold until 4 March following official discussions between these countries and the US, while China has challenged the US tariffs at the WTO.

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On 10 February, Trump announced a 25% tariff on all steel and aluminium imports, set to take effect on 12 March, eliminating previous exemptions and quota arrangements.

As of now, India has not yet held any official talks with the US over tariff issues. However, backchannel discussions, in coordination with the ministry of external affairs, have helped India avoid being included in the first list.

India’s import duties

Data from the commerce ministry shows that import duties on several high-value American products into India are negligible. For instance, in FY24, petroleum crude—the US’s top export to India valued at $5.03 billion—was taxed at just Re 1 per tonne, making it one of the lowest-taxed imports despite its high trade value.

Other key exports from the US, including coal valued at $4.2 billion, large aircraft ($1.94 billion), and liquefied natural gas ($1.41 billion), face 2.5% tariff, ensuring steady trade in the energy and aviation sectors.

Meanwhile, India’s Union budget on 1 February announced duty cuts on several products that feature prominently in US exports to India. For instance, import duty on motorcycles was cut to 30% in the budget from 50% earlier, a move that is expected to benefit US’s premium brand Harley-Davidson.

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The budget also introduced tariff cuts on Ethernet switches (from 20% to 10%); satellite ground installations (10% to zero); and synthetic flavouring essences (100% to 20%), among others.

“The revision of duties in the latest Union budget is a signal that India is willing to accommodate US interests,” said Ajay Srivastava, founder of Global Trade Research Initiative (GTRI), an independent policy think tank, adding that the reductions reflect India’s efforts to facilitate trade and strengthen economic ties with the US.

What more can be done

Experts such as Bipin Sapra, tax partner at EY India, suggested exploring limited trade agreements to help both countries secure concessions in areas of their interests.

“There might be cases where tariffs on some products may be high in India, but the same is for imports from all countries, other than countries with whom FTAs (free trade agreements) have been signed, and not specifically for US,” Sapra said.

Sivakumar Ramjee, executive director-indirect tax, Nangia Andersen LLP, said, “India should adopt a strategic approach to address US concerns under the ‘Fair and Reciprocal Trade Plan’ while ensuring its economic interests are protected.”

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He added that a possible trade deal could focus on reducing tariffs in specific sectors while ensuring market access for Indian goods in the US.

With a $35-billion trade surplus, India seeks to avoid US tariff hikes on key exports like garments, electronics, engineering goods, and pharmaceuticals. Exports of these four categories rose from $38.84 billion in FY22 to $46.43 billion in FY24, with April-December 2024 shipments at $37.05 billion.