As US President Donald Trump threatens 100% reciprocal tariffs against India, Commerce minister Piyush Goyal’s will now visit the US to negotiate the Bilateral Trade Agreement. How will this tariff war impact India?
Our Bureau
Washington, DC/New Delhi
US President Donald Trump targeted India’s import duties in speech to a joint session of Congress on Tuesday. Trump specifically targeted India’s tariffs on automobile imports saying, “India charges us auto tariffs higher than 100%”. While addressing a joint session of the US Congress, Trump said that the reciprocal tax will kick in on April 2. He said that the US has been ripped off for decades by nearly every country on earth and vowed not to “let that happen any longer.”
Trump said, ” Under the Trump administration, you will pay a tariff and, in some cases, a rather large one. Other countries have used tariffs against us for decades and now it’s our turn to start using them against those other countries. On average the European Union China, Brazil India Mexico and Canada have you heard of them and countless other nations charge us tremendously higher tariffs than we charge them. It’s very unfair. India charges us auto tariffs higher than 100 percent.”
The US President also vowed to Tax the countries who were taxing the US and claimed that the US had been ripped off for years by every country on Earth.
Union Finance Minister Nirmala Sitharaman on Thursday said that the impact of the US tariffs will be felt on India, adding that Union Minister Piyush Goyal is going to America and holding talks with the government there. Speaking at an event in Visakhapatnam, Sitharaman further stated that the tariffs are likely to increase with the decision of the US President. Sitharaman said, “We will have to see how the Commerce Ministry takes up negotiations with the U.S. to ensure that our interests are well-represented.”
On February 18, Donald Trump had outlined a new trade policy focused on fairness and reciprocity and said that the US would implement reciprocal tariffs, charging other countries the same tariffs they impose on American goods.
Trump emphasized that this approach would address unfair trade practices, including non-monetary barriers, subsidies, and VAT systems to encourage foreign countries to either reduce or eliminate tariffs against the US or set up their manufacturing base in the US which will add to its growth in the long term.
Meanwhile, Ajay Sahai, Director General and CEO of Federation of Indian Export Organizations (FIEO), said he sees US President Donald Trump’s recurring statement against India- as a ‘tariff king’- to be a negotiating posture. “I personally feel that these kinds of statements are a kind of negotiating posture,” Sahai said, affirming that Indian leadership is quite capable of making a deal. Sahai hopes India will be able to broker a preferential tariff arrangement with the US so that Trump’s reciprocal tariff is not applied to India.
During the recent meeting between President Trump and Prime Minister Narendra Modi, the two leaders resolved to expand trade and investment to make their citizens more prosperous, nations stronger, economies more innovative, and supply chains more resilient.
They resolved to deepen the US-India trade relationship to promote growth that ensures fairness, national security and job creation. To this end, the leaders set a bold new goal for bilateral trade – “Mission 500” – aiming to more than double total bilateral trade to USD 500 billion by 2030.
Referring to the Mission 500 aim, Sahai said it would entail that India will have greater facilitation of trade. “Our Prime Minister has already travelled to the US. He talked about Mission 500 where we want to increase our exports from USD 200 billion to USD 500 billion, which also entails that we will have greater facilitation of trade,” he said.
“We will also be looking into that Indian products may be given a kind of free of duty treatment, and we can also reciprocate by providing similar concessions to some of the US goods,” Sahai said, when Commerce Minister Piyush Goyal is in US for trade-related discussions. “These kinds of negotiations will definitely help.”
Goyal’s visit to the US follows Trump-Modi’s plans to negotiate the first tranche of a mutually beneficial, multi-sector Bilateral Trade Agreement (BTA) by the fall of 2025. The two leaders had committed to designating senior representatives to advance these negotiations.
India’s export growth has been hampered over the past decade due to a combination of high import tariffs and low foreign direct investment (FDI) in mid-tech manufacturing sectors, according to a report by HSBC.
The report suggests that potential trade tariffs under U.S. President Donald Trump’s administration could serve as a catalyst for change, provided India implements deeper reforms.
It said “The combination of high import tariffs and low FDI in mid-tech sectors has hurt India’s export potential over the past decade. One positive from the potential US trade tariffs is that they could become a catalyst for change, but reforms must run deep”.
The study in the report examines India’s economic performance over two distinct periods: the “high growth” decade (FY01-FY10), when the country experienced rapid economic expansion, increased global export share, and strong investment inflows, and the “lower growth” decade (FY11-FY20), when these factors significantly weakened.
During the second period, India’s FDI inflows were less focused on mid-to-low-tech industries, such as food processing, apparel, furniture, and toys–sectors that are crucial for job creation and export competitiveness.
The report analysis points out that India did not benefit as much as Southeast Asian nations, particularly ASEAN countries, from shifts in global supply chains during Trump’s first presidency. Vietnam, for example, made substantial gains in industries such as electronics, apparel, and footwear, positioning itself as a key alternative to China.
Meanwhile, India’s efforts to attract FDI in similar sectors have lagged, despite its potential.
The report suggested that India could get a second chance if global supply chains are restructured again under Trump’s leadership. With new tariffs likely to be imposed on large exporting nations like China, global businesses may look for alternative production bases.
This could open opportunities for India to strengthen its position in mid-tech manufacturing and labor-intensive sectors.
But foreign affairs experts have criticized the decision of Donald Trump administration to impose reciprocal tariffs on India, while pointing that the move is a matter of ‘concern’ for the whole world and will end up disturbing the trade structure.
Former diplomat KP Fabian, while talking about US President Donald Trump’s address during the joint session of US Congress, said on Wednesday that enforcing higher tariffs is a matter of concern for India, as well as the whole world. Fabian said that the endeavor was ‘foolish’, as it would bring the trade of the entire world down.
“This (enforcing higher tariffs) should be a matter of concern for India and the whole world… It is a foolish endeavor because other countries will impose tariffs on the United States, and world trade will come down… Inflation has started going up, and the stock market has started going down in the US. Is this his way of making America great again?… He is dismantling the bureaucracy,” Fabian told ANI.
Further, talking about Trump’s decision of banning transgenders in women’s sports, he said, “Transgender is the reality, there is no point in wishing it away or being so cruel to them.”
Another Foreign Affairs expert, Robinder Sachdev, also criticized Trump administration’s tariff announcement, saying that though Trump’s views are “correct in principle”, it will disturb the structure of trade.
While speaking to ANI, he said, “In principle, what Trump is saying is correct (about imposing reciprocal tariffs) … But this will disturb the structure of trade… A matter of greater concern for India is the tariff the US could impose on steel and aluminium exports… If it is increased, India’s exports could decrease by 30-50 per cent… Trump’s strategy is to lower oil prices and reduce transport costs, which can help bring down inflation in the US,” he said.
Sachdev referred to Trump’s targeting of India’s import duties in speech to a joint session of Congress on Tuesday. While addressing a joint session of the US Congress, Trump said that the reciprocal tax will kick in on April 2.
Speaking about Trump’s massive crackdown on illegal immigrants, he said, “There is no doubt that the steps taken by Trump have decreased the rate of Illegal immigrants in the US… American agents are making a full show of arresting illegal immigrants to instill fear in other illegal immigrants and to show the citizens of the US that he is working on his campaign policy.”
