U.S. President Donald Trump announces reciprocal tariffs on India, citing trade imbalances

New York : In a bold move dubbed “Liberation Day,” U.S. President Donald Trump announced a series of reciprocal tariffs on major trading partners, including a 26% tariff on imports from India, effective April 9, 2025. Speaking from the White House Rose Garden on April 2, Trump framed the tariffs as a critical step to address what he described as decades of unfair trade practices that have “looted, pillaged, and plundered” the American economy. The announcement has sparked global debate, with India’s commerce ministry assessing the potential fallout while emphasizing that the impact may be a “mixed bag” rather than a outright setback.

A Response to High Indian Tariffs

Trump justified the tariffs by pointing to India’s high duties on American goods, which he claimed average 52%, including what he described as currency manipulation and non-tariff barriers. Displaying a chart during his speech, he highlighted specific examples, such as India’s 70% tariff on passenger vehicles and 80% levy on rice. “India is very, very tough,” Trump said, recalling a recent conversation with Prime Minister Narendra Modi. “He’s a great friend of mine, but I told him, ‘You’re not treating us right.’ They charge us 52%, and we’ve been charging them almost nothing for years.”

The 26% tariff on India is part of a broader policy that includes a universal 10% tariff on all U.S. imports starting April 5, with additional country-specific rates for nations deemed to have significant trade imbalances with the U.S. Other countries targeted include China (34%), Vietnam (46%), and the European Union (20%). Trump described the rates as “discounted” and “kind,” noting they are half of what he believes these nations charge the U.S., a gesture he said reflects America’s generosity.

Exemptions and Sectoral Impacts

Not all sectors will feel the sting of the new tariffs. The White House has exempted pharmaceuticals, energy products, semiconductors, and certain minerals from the levies, providing significant relief to India’s generic drug industry, which relies on the U.S. for 30% of its exports. This decision has buoyed Indian pharmaceutical stocks, with companies like Sun Pharma and Dr. Reddy’s Laboratories seeing gains despite a broader market dip.

However, other sectors face challenges. India’s electronics exports, which account for 32% of its shipments to the U.S., and gems and jewelry, valued at over $9 billion annually, are expected to be hit hard. The textile and apparel sectors may fare better, as competitors like China and Vietnam face even steeper tariffs, potentially boosting India’s relative competitiveness. Analysts estimate that India’s exports to the U.S., which constitute 18% of its total goods exports, could see a 3-3.5% decline, though some argue the overall economic impact may be limited, affecting only 1.1% of India’s GDP.

India’s Response: A Measured Approach

India’s commerce ministry has adopted a cautious stance, with a senior official describing the tariffs as a “mixed bag.” The official noted ongoing bilateral trade negotiations, initiated during Prime Minister Modi’s February 2025 visit to the U.S., which aim to secure a deal by fall. India has signaled openness to cutting tariffs on over $23 billion worth of U.S. goods, a move that could ease tensions. “It’s not a setback,” the official told reporters. “We’re assessing the impact and engaging with the U.S. to address concerns.”

Indian exporters, represented by bodies like the Federation of Indian Export Organisations (FIEO), expressed concern but highlighted that India’s diversified trade portfolio could cushion the blow. Some analysts suggest India may explore retaliatory measures, as it did in 2018 when it raised tariffs on 29 U.S. products in response to U.S. duties on steel and aluminum. For now, New Delhi appears focused on diplomacy, with Minister of State for Finance Pankaj Chaudhary emphasizing, “For Trump, it’s America first, but for Modi, it’s India first.”

Global and Domestic Reactions

The tariffs have rattled global markets, with India’s BSE Sensex dropping over 500 points and the rupee slipping 0.16% to 85.6375 against the dollar. World leaders, including those from the U.K. and EU, have voiced concerns, with some hinting at countermeasures. British Prime Minister Keir Starmer warned that “nobody wins in a trade war” but vowed to negotiate pragmatically.

In the U.S., Trump’s announcement drew cheers from supporters at the Rose Garden event, who see the tariffs as a fulfillment of his “America First” agenda. Critics, however, warn of potential inflation and supply chain disruptions, particularly for consumers reliant on affordable imported goods. The exemptions for pharmaceuticals and energy have tempered some fears, but economists remain divided on whether the tariffs will revive U.S. manufacturing or spark a broader trade war.