US president Donald Trump’s move to slap additional customs duties – “reciprocal tariffs” – in the range of 10-49% on nearly 60 countries, saw India at the median level with a 27% extra levy on most products across industrial and farm categories. The full additional impost will take effect from April 9, while a 10% baseline duty will be put in place by Saturday.
The additional tariffs will apply over and above the current US levies, which averages 3.3% on a most favoured nation basis.
While these levies are applied country-wise, certain product-level tariffs will also take effect concurrently on all countries – a 25% duty on steel and aluminum products became operational on March 12, and a 25% impost on automobiles and auto parts took effect from Wednesday. The US had earlier announced special extra tariffs for three of its largest trading partners namely China, Mexico and Canada.
Trump’s new set of tariffs made no distinction between rich or poor countries or the US’s allies, friends or foes.
Though the stated objective behind the decision is to re-invigorate the US manufacturing industry, which has lost much of its famed global edge over the recent decades, most independent experts feel it is faulty and could boomerang. The move could slow global growth, potentially pushing the US itself into a recession, and stoking inflation worldwide, they feel.
India’s GDP growth in FY26 is expected to take a hit of 0.5-0.6% owing to the combined effect of a global economic slowdown and a hit to its own exports to the US, economists say.
Following Trump’s announcement, markets around the world sank on Thursday, amid concerns about the rising costs for businesses and households. The S&P 500, which tracks 500 of the biggest American firms, opened more than 3% lower while the UK’s FTSE 100 share index fell 1.5% and other European markets also dropped. While stocks fell, the price of gold touched a new record, indicating the investors quest for safety. However, Indian markets stood firm – while both the Sensex and Nifty s opened sharply lower, more than half of their losses during the session.
In a sign that a trade war has begun, both the European Union and China on Thursday pledged to retaliate against Trump’s move, while several other countries, including Japan and Australia hinted at adverse responses.
For India, the reciprocal tariff, though much higher than anticipated given its current tariff levels, wasn’t upsetting, as in relative terms, it is better placed as against a few key competitors in US markets , including China, Vietnam, Bangladesh. If the US tariffs persist, India could also hope for gains from the changing supply chain dynamics, especially in sectors like auto parts and electronics. A waiver for the pharmaceutical products form the additional tariff is also seen as a positive for the country, which caters to nearly half of the US market for branded generic medicines.
Among India’s industrial sectors, textiles & garments and electronics may see a relative advantage in the US markets, but it is unclear if the overall trade volumes for even thee sectors would shrink. The price elasticity of Indian exports will hold the key.
The duties were imposed by an executive order by Trump citing “national emergency. While announcing the tariffs he said: “Should any trading partner retaliate against the US in response to this action through import duties on US exports or other measures, I may increase or expand in scope the duties imposed under this order to ensure the efficacy of this action.” If additional duties do not deliver in boosting domestic manufacturing, the duties may be increased even further with any provocation, as per the order.
Trump said that the tariffs are “discounted” as they are just half of what they should be if strict reciprocity was followed. These tariffs, the proclamation by Trump said, seek to match the tariff and non-tariff burden that American businesses face while exporting to or operating in other countries. This means that the existing tariffs in each country is calculated with tariff equivalents to non-tariff barriers and other trade-impacting measures like subsidies maintained the countries. Tariffs imposed on India were half of what New Delhi charged the US — 52 % after factoring in trade and non-trade barriers and currency adjustments, Trump said, while the current simple average tariffs for the country is just 17%.
An official said that India would have liked to be spared from these tariffs as both countries are already in negotiations on a Bilateral Trade Agreement (BTA). “While these tariffs do present challenges, India’s position remains comparatively favourable,” president of Federation of Indian Export Organisations (FIEO) S C Ralhan said.
The US has offered a way out of these higher tariffs if any country takes significant steps to remedy non-reciprocal trade arrangements and align sufficiently with the US on economic and national security matters. “I may decrease or limit in scope the duties imposed under this (reciprocal tariff) order,” Trump said.
The US is the biggest market for goods and services for India. According to data from the US trade representative’s office, India’s trade surplus with the US was $45.7 billion in 2024, a growth of 5.4% over 2023. Total goods trade between the two countries was $129.2 billion in 2024, with India’s exports at $87.4 billion, up 4.5% on year while imports were $41.8 billion, up 3.4% on year. “Despite the tariffs, certain sectors in India, including apparel, gems and jewellery, leather, electronics, chemicals, plastics, and furniture, may experience a diversion of exports, potentially offsetting some adverse effects,” FIEO President said.
While the pharma sector has been spared, the Trump administration has already announced higher duties in automobiles and parts, and steel and aluminium. The bullion is out of the additional duties but impact on gold jewellery exports will be severe. Food exports barring shrimp might hold because most of the items that are exported are consumed by the Indian diaspora. Smartphones, which are a key export to the US, India will maintain its competitiveness as the higher taxes have been imposed on competitors.
