US Reciprocal Tariffs: Impact on India - GTRI Analysis

New Delhi, Feb 14 (PTI) The US government's move to impose reciprocal tariffs to match higher duties levied by its trading partners is not likely to hurt India much as there are differences in the export profiles of the two countries, economic think tank GTRI said on Friday.

Citing an example, the Global Trade Research Initiative (GTRI) said that if the US charges 50 per cent reciprocal tariffs on Indian pistachios because India charges the same, India is happy as it does not export pistachios.

Additionally, for 75 per cent value of the US exports to India, the average tariff is less than 5 per cent, GTRI Founder Ajay Srivastava said.

In contrast, India faces high US tariffs on many labour-intensive goods like textiles, garments, and footwear, ranging between 15-35 per cent on several products, he added.

"Given the differences in the export profiles of the two countries, reciprocal tariffs may not have a significant impact...In the new Trump era, India may wait to see the US decision in April on reciprocal tariffs and then respond in equal measures as we did in June 2019," Srivastava said.

After talks with Prime Minister Narendra Modi in Washington, US President Donald Trump announced that India will buy more oil, gas and military hardware from America to bring down the trade deficit but asserted that Washington will not spare New Delhi from reciprocal tariffs.

On the trade deal, he said though the details are not yet clear, it could be a limited deal on reciprocal tariffs, expected to be announced in April.

The US has already announced non-reciprocal tariffs of 25 per cent on steel and aluminium.

"This is also not the best time for an FTA (free trade agreement) or full trade agreement as the US does not respect FTAs. An example is how the Trump administration has imposed tariffs on Mexico and Canada on steel and aluminium in violation of USMCA (US Mexico Canada) provisions," Srivastava said.

The GTRI also said that the US is not clear if the reciprocal tariff applies to specific products or entire sectors.

A White House fact sheet dated February 13 said, "The US average applied Most Favored Nation (MFN) tariff on agricultural goods is 5 per cent. But India's average applied MFN tariff is 39 per cent. India also charges a 100 per cent tariff on US motorcycles, while we only charge a 2.4 per cent tariff on Indian motorcycles."

On this, Srivastava said that the US must choose a criteria - product or sector - for transparent decision making, else all the US efforts on MFN tariff cuts will end up benefiting China as China is the largest global supplier of industrial goods.

During April-November 2024-25, the US was the second largest trading partner of India with USD 82.52 billion bilateral trade in goods (USD 52.89 billion worth of exports, USD 29.63 billion of imports and USD 23.26 billion trade surplus).

During 2021-24, America was the largest trading partner of India. The US is one of the few countries with which India has a trade surplus.

In 2023-24, the US was the largest trading partner of India with USD 119.71 billion bilateral trade in goods (USD 77.51 billion worth of exports, USD 42.19 billion of imports and USD 35.31 billion trade surplus).