How much will India lose if US imposes reciprocal tariffs? These products may suffer most...

Delivering his first address to the joint sitting of the Congress, US President Donald Trump declared amid standing ovation, that the imposition of reciprocal tariffs on India, Mexico, Canada, China and the European Union would come into effect on April 2, 2025. 

How will it impact the India-US bilateral trade? 

How much Indian exports to the US will be hit by the increased US tariffs?

India-US Trade Deficit

India-US bilateral trade is estimated to be $129.2 billion in 2024. While India exported goods worth $87.40 billion, it imported goods worth $41.8 billion. Thus, India enjoyed a trade surplus of $41.8 billion during the period. 

In other words, the US has a trade deficit of $41.8 billion with India, a country that is still a developing economy. 

Analysts believe, that Donald Trump is peeved at the fact that it has a trade deficit even with those countries, which are poorer with comparatively much less GDP and receive aid and grants. 

What Did Donald Trump Say On Tariffs?

While defending Department Of Government Efficiency chief Elon Musk's decision to stop USAID funding to India, Trump said bluntly, "They take advantage of us pretty good. One of the highest tariffed nations in the world. We try and sell something. They have a 200% tariff. And then we're giving them a lot of money to help them with their election." 

Trump, who swept the US Presidential Elections 2024, based his campaign on "America First" and "Make America Great Again" slogans, which mean, the American economy must be strengthened by protecting it. 

India Slashes Tariffs On US Goods

Though Indian Finance Minister Nirmala Sitharaman tried to appease the US President by lowering the tariffs on high-end motor cycles manufactured by US giant Harley Davidson before Prime Minister Narendra Modi's visit to Washington, Donald Trump chose to declare his intention of imposing fresh tariffs on Indian goods in his presence. 

How will it impact the Indian economy if the reciprocal tariff policy is implemented on Indian exports? 

How Much Higher Indian Tariffs Are?

According to a study carried out by Bloomberg Economics’ Maeva Cousin, the average tariff levied by India on the US imports is 10 percentage points higher than that imposed by Washington on Indian imports. 

Morgan Stanley has found in its study that the US may impose at least 6 percentage points of additional tariffs on Indian goods. 

Citi Research has concluded in its analysis that Indian exports to the US may come down by 7 billion dollars per year due to this hike. 

India May Lose 7 Billion Dollars

According to Economic Times, chemicals, steel, aluminium and other metal products, jewelry, automobiles, pharmaceuticals and agriculture products may suffer the most.

While India exported to the US gems and jewelry worth $8.5 billion, pharmaceuticals worth 8 billion, and petrochemicals around $4 billion in 2023, it levied an average tariff of 11% on the US goods, 8.2 percentage points higher than the tariffs the US charged on Indian goods. 

The US exported goods worth 42 billion dollars to India in 2024. However, it faced comparatively higher tariffs, from 7% on wood products and machinery to 15% on footwear to 20% on transport to 68% on food products. 

According to a US report, the average tariff on those enjoying the Most Favoured Nation status is 5%, while the average tariff on US goods in India is 39%. 

However, India and the US are likely to begin talks on Bilateral Trade Agreement. 

It may take months to conclude the talks and sign a deal. If the two sides eventually strike a deal to mutual benefit, New Delhi may skip the brunt to some extent. But it is clear that Washington may bargain hard and impose tougher tariffs on Indian goods.