How Will The 27% Trump’s Tariff Impact India!

Despite displaying bonhomie with Indian Prime Minister Narendra Modi and calling him ‘a great friend’, US President Donald Trump imposed his ambitious retaliatory tariff on India. The 27% reciprocal tariff on India is a major trade blow that could rattle the country’s economy.

This can prove to be a setback to India which has been expecting tariff concession.

Beginning April 9, a majority of Indian goods exported to the US will attract a steep 27% tax which could be detrimental to the businesses. While announcing the tariff rate on India, the 78-year-old US President termed the Indian tariff regime “very, very tough”.

At the Make America Wealthy Again press conference, Trump said that India has been charging exorbitant tariffs on American goods while the US has been lenient for decades. The new tariff structure is meant to level the playing field, he said. The new retaliatory tariff would have a hard-hitting effect on the revenues of many firms, from small companies to big conglomerates in the IT, auto sectors. The US has exempted pharma imports from the reciprocal tariff.

To soften the blow, it is learnt that India is considering slashing tariffs on 23 billion US imports including gems, jewellery, pharmaceuticals and auto. However, there is a silver lining to the reciprocal tariff announcement as it will impact India less when compared to other countries. The 27% tariff is less than the 34 per cent imposed on China, 32 per cent on Indonesia, 36 per cent on Thailand, and 46 percent imposed on Vietnam, both considered top exporters to the US.

The 27% reciprocal tax is in additional to the 25% tariff the US announced on imported automobiles and auto parts effective April 2, light trucks and cars from May 3. The new tariff announced by POTUS include a universal 10% duty on all imports into the US beginning from April 5 and an additional 16% applicable from April 10. These tariffs would be imposed on all countries, including India, as part of the broader trade policy.

Post the imposition of the retaliatory tax, the Commerce ministry is closely studying the situation and looking at possible responses. Discussions are underway between the Indian and US trade teams to come to a conclusion on mutually beneficial, multi-sectoral Bilateral Trade Agreement (BTA).