Trump’s reciprocal tariffs: How will they hit India’s trade and economy?

By: Shantanu Bhattacharji

Washington’s tariffs threaten global growth, but for New Delhi, they could be a strategic opening. As businesses rethink supply chains, India has a chance to cement its place as a China-plus-one hub.

Donald Trump’s ‘Liberation Day’ tariff overhaul treats allies and adversaries alike, and India is in the crosshairs. The US president’s latest trade broadside slaps a 10 per cent blanket duty on all imports from April 5, with extra penalties for countries deemed the “worst offenders”—a list that includes India, China, and Taiwan.

For New Delhi, Trump’s tariff king label is a familiar charge. His administration previously targeted India for high tariffs, culminating in GSP trade preference revocation in 2019. The 52 per cent tariff claim, however, is dubious, bundling traditional tariffs with loosely defined non-monetary barriers and currency policies. With China pegged at 67 per cent and South Korea at 50 per cent, India sits awkwardly among Trump’s biggest targets.

If implemented, the new levies could test India's US-aligned trade pivot, forcing policymakers to reassess tariff structures and retaliatory options. The move could slow India’s export momentum, particularly in pharmaceuticals, textiles, and IT services. New Delhi may push for exemptions or deepen trade ties with non-US markets like the EU and Middle East to offset potential losses. Markets will be watching for diplomatic pushback—and whether these tariffs survive legal and political hurdles.

Trump’s rationale—that these measures counter unfair taxation of US goods—ignores the fundamental principles of comparative advantage and the integrated nature of modern trade. Such a move could dent US economic growth by raising input costs for manufacturers and squeezing consumer purchasing power. While the rhetoric may resonate with his political base, the actual economic fallout could be severe.

Trump’s tariff blitz may hurt India’s exports, but it could also serve as a catalyst for domestic reform. With higher US import duties squeezing Indian goods, New Delhi may double down on self-reliance efforts like the Production-Linked Incentive (PLI) scheme and Make in India.

Notably, the US runs a surplus in services, meaning it benefits from global trade dynamics more than Trump’s rhetoric suggests. By pushing protectionism, Washington risks hurting its own companies reliant on global supply chains and triggering retaliation from trading partners.

India has dodged the worst of Trump’s tariff onslaught, but its advantage is fragile. Vietnam, China, and Bangladesh face steeper trade barriers, yet that edge could fade if rivals clinch deals with Washington. The smart play for New Delhi is to slash tariffs, fast-track trade talks, and lock in access to key markets in the US, the EU, and the UK.

America’s trade war threatens global growth, but India can turn disruption into leverage. A more open trade policy would sharpen its export competitiveness and cement its role as a China-plus-one manufacturing hub.

Analysts say the impact won’t be short-lived. Trade blocs will shift, alliances will be strained, and businesses will rethink supply chains. Some economies may gain as firms seek stability, but the broader fallout—higher costs, slower growth, and rising protectionism—will outlast Trump’s presidency.

New US tariffs put India in a familiar spot—balancing diplomatic ties with economic interests. The government’s cautious approach signals an attempt to assess damage before formulating a response. For Indian exporters, the stakes are high, especially in sectors reliant on US demand. While retaliatory tariffs are unlikely, strategic adjustments—diversifying export markets or negotiating exemptions—are on the table.

The US tariffs will hit key Indian exports, including nearly $14 billion in electronics and over $9 billion in gems and jewellery. However, pharmaceutical shipments—worth about $9 billion last fiscal year—escaped the levies, offering relief to the drugmakers, which rely on the US for nearly a third of their overseas sales, primarily through low-cost generics.

It is worth noting that India’s export competitiveness faces a milder impact than key rivals, as its tariff exposure remains moderate relative to the highest and lowest rates. Washington runs a $46 billion trade deficit with India, putting pressure on New Delhi to negotiate relief. India is reportedly considering tariff cuts on $23 billion worth of American goods to cushion the blow to key export sectors, including gems and jewellery, pharmaceuticals, and auto parts.