New Delhi: US President Donald Trump has asserted that Washington will not spare India from reciprocal tariffs.
The President has set in motion his plan to impose reciprocal tariffs on imports, which is expected to further deepen the global trade war.
During 2021-24, the US was the largest trading partner of India.
From April-November 2024-25, the bilateral trade in goods between the two countries stood at USD 82.52 billion (USD 52.89 billion in exports, USD 29.63 in imports). The trade gap was USD 23.26 billion which is in the favour of India.
The US accounts for about 18 per cent of India’s total goods exports, 6.22 per cent in imports, and 10.73 per cent in bilateral trade.
Trump has announced a 25 per cent duty on all steel and aluminium imports. It will come into effect from March 12.
Moody’s Ratings have stated that Indian steel producers will face increased challenges in exporting their products following the US decision to impose the 25 per cent tariff.
What are tariffs?
In international trade parlance, tariffs customs duties or taxes are imposed on the import of goods. The importer has to pay this duty to the government. Normally, companies pass on these taxes to end users.
For example, if a company is importing a product ‘X’, having a 10 per cent customs duty, valued at Rs 100 from another country, the cost of the product will go up to Rs 110.
These duties, which are indirect taxes, are a source of revenue for a country.
Anti-dumping duty, countervailing duty or safeguard duty are also kinds of tariffs.
What are reciprocal and retaliatory tariffs?
Normally, both can be used synonymously. They are imposed by countries to match hike in duties or high tariffs by trading partners. For example, when in 2018, the US imposed higher duties on certain steel and aluminium products, India retaliated by raising tariffs on 29 US products, recovering equivalent revenue.
Why do countries impose tariffs?
These tariffs are imposed to make imported goods expensive and in turn, promote domestic manufacturing and job creation.
It also protects domestic players from cheaper imports.
What are the negative impacts of tariffs?
Higher import duties are inflationary and make inputs expensive for the domestic industry. For example, if an auto company needs some component, which is not produced in the country, it will have to pay a higher price for its import because of tariffs.
This will make the product expensive for domestic users.
Why Trump is talking about imposing reciprocal tariffs?
The US is facing huge trade imbalances with countries, especially with China. With India, the US has a trade deficit of USD 35.31 billion in goods in 2023-24. To bridge this gap, the US President is imposing these duties.
Is there any substance in Trump’s allegations that India is a ‘tariff king’ or ‘tariff abuser’?
According to the economic think tank Global Trade Research Initiative (GTRI), these are unfair and the US itself imposes high duties on several goods to safeguard its domestic markets.
Citing data from the World Trade Organisation’s World Tariff Profiles 2023, GTRI has highlighted the significant tariffs the US places on products such as dairy (188 per cent), fruits and vegetables (132 per cent), cereals and food preparations (193 per cent), oilseeds, fats, and oils (164 per cent), and beverages and tobacco (150 per cent).
Other goods, including coffee, tea, cocoa, and spices, face tariffs of 53 per cent, while fish products and chemicals are taxed at 35 per cent and 56 per cent, respectively.
India’s average duty rate stands at 17 per cent, which is higher than the US’s average rate of 3.3 per cent.
GTRI founder Ajay Srivastava has noted that some countries, including the US, Japan, and South Korea, impose steep tariffs on certain goods, with rates as high as 350 per cent, 457 per cent, and 887 per cent, respectively.
Are the US reciprocal tariffs WTO compliant?
According to WTO norms, member countries are required to submit their tariff schedules which include bound duty rates for all products. The duty imposed by India complies with the WTO (World Trade Organisation) norms.
However, any duty beyond the bound rates is violative of these rules.
Trader experts think that duties imposed by the US are violative of these norms.
PTI
