How will US Liberation Day reciprocal tariffs hit 'Dirty 15' including India? Will it cause inflation, recession in US?

April 2! Washington will celebrate the US Liberation Day today as President Donald Trump will formally announce the reciprocal tariffs, which will come into effect immediately. However, much before that, enough hullaballoo has been generated over the proposed move, the stock markets across the world have witnessed a blood bath, crude prices have been set on fire, and business houses and governments across the world have expressed apprehensions. Experts have predicted a hike in the inflation rate and a recession in the US economy. 

It is not yet certain if the Donald Trump administration will announce sector-specific tariffs that may lead to millions of tariff decisions or country-specific tariffs. 

How much tariffs may be imposed?

The 'Washington Post' has reported that a minimum of 20% tariffs may be imposed on all goods coming from all countries, with higher rates for certain countries. 

It has also been said that the Trump administration may use a part of the revenue collected in giving tax breaks and may return a part of the tax already collected. 

'Dirty 15'

US Treasury Secretary Scott Bessent has coined the term 'Dirty 15', which refers to the 15% of economies that account for the bulk of trade imbalances with the US. 

Though he did not name these 15 economies, the US has the biggest trade deficit with China, at $295.4 billion in 2024. It is followed by the European Union (a group of 27 countries), Mexico, Vietnam, Ireland, Germany, Taiwan, Japan, South Korea, Canada, India, Thailand, Italy, Switzerland and Malaysia. 

US trade deficit with India 

Washington suffered a trade deficit of $41.8 billion to India in 2024. As the total bilateral trade reached an estimated $129.2 billion, the US exported goods worth $41.8 billion, while it imported products worth $87.4 billion.

Hours before the imposition of new tariffs on the US Liberation Day, 
White House Press Secretary Karoline Leavitt slammed India for imposing a 100% tariff on American agricultural produce and a 150% tariff on alcohol. The US has already announced a 25% tariff on automobiles, motor parts, steel and aluminium products. 

How may reciprocal tariffs hit Indian economy?

Donald Trump has also announced a 20% secondary tariff on all those countries that buy Russian crude oil. It may be considered a setback for India because it imported around 1.9 million barrels per day (bpd) of Russian crude oil in March. 

If media reports are to be believed, India may lose US exports worth $3 billion every year. If New Delhi lowers tariffs on US farm produce, Washington may flood Indian markets with maize, wheat, soybean, dairy products, meat and fruits, pushing down the prices and posing stiff competition to domestic producers and farmers. The loss is yet to be calculated. 

How may reciprocal tariffs hit US economy?

Experts believe the new tariffs may boomerang and hit the US economy hard. The new tariffs will ultimately be paid by the US consumers, pushing the prices up. As the US is a consumer economy, meaning it consumes more than it can produce, the trade deficit will continue as the imports will continue, the only difference will be that Americans will pay more. 

Secondly, the US manufacturers will suffer as they will have to pay more in input costs. With prices going up, domestic manufacturers may lower or stop production and it may kickstart a recession.