Trump hits India with steep 27 pc tariffs; New Delhi says studying implications

Washington/New Delhi, Apr 3 (PTI) President Donald Trump slapped universal duties on all countries exporting goods to the US and additional steep levies on countries like India, potentially impacting sales of products from shrimp to steel in the world's biggest economy.

The US imposed a steep 27 per cent tariff on all goods, barring pharmaceuticals, semiconductors, energy and certain minerals not available in the United States, that are imported from India, calling the country the "worst offenders" of unfair trade practices.

Export of products such as shrimp, carpet, medical devices and gold jewellery to the US will be impacted. On the other hand, exports of electronics, textiles, and pharma will get an edge over its competitor countries.

Exemption of energy from the tariffs would also mean that India can continue to export fuels like gasoil and gasoline to the US.

The goods that were exempted from the tariffs made up for just over 25 per cent of the total exports from India to the US.

The Indian government reacted cautiously, saying it is "carefully examining the implications" of the announcements and will also study opportunities that may arise due to this new development in the US trade policy.

Trump announced the imposition of additional ad valorem duties ranging from 10 per cent to 50 per cent on imports from all trading partners. The baseline duty of 10 per cent will be effective on India from April 5 and an additional 27 per cent from April 9.

The 27 per cent duty would be over and above any existing levy that Indian products entering the US may currently attract.

Though the move is expected to impact India's exports of certain goods to the US, experts say that India is better-placed than its competitors, including Bangladesh (37 per cent), China (54 per cent), Vietnam (46 per cent) and Thailand (36 per cent) who face increased levies.

President Trump, in a historic measure to counter higher duties on American products imposed globally, announced reciprocal tariffs on about 60 countries.

"This is Liberation Day, a long-awaited moment. April 2, 2025 will forever be remembered as the day American industry was reborn, the day America's destiny was reclaimed, and the day that we began to make America wealthy again. We are going to make it wealthy, good, and wealthy," Trump said in his remarks from the Rose Garden at the White House on Wednesday.

He said that the tariffs imposed on India were half of what New Delhi charged the US -- 52 per cent after factoring in trade and non-trade barriers and currency adjustments.

He said that the United States charges other countries only a 2.4 per cent tariff on motorcycles, but Thailand and others are charging much higher rates, like 60 per cent, India 70 per cent, Vietnam 75 per cent, and others charge even higher rates.

India's goods trade surplus with the US was USD 46 billion in 2024 (1.2 per cent of GDP). Key pharma exports have been exempted for now while automobiles and components have already been hit by a 25 per cent tariffs just a few days back. India's software exports to the US, estimated at around USD 103 billion in FY24, too would have no tariff impact. Pharma exports at USD 12.7 billion form almost 14 per cent of total exports to the US from India.

Engineering goods and specialty chemicals could be worst impacted. Automobiles exports from India to the US is just USD 2.8 billion, or roughly 3 per cent of total exports.

For the Indian gems and jewellery sector, already struggling since the last few years due to changing customer preferences, lab-grown diamond technology, demonetisation, and soaring gold prices, the US tariff developments now create additional adverse impact, with an increased risk of job losses and margin erosion.

Gems and jewellery exports stand at USD 11.5 billion or almost 13 per cent of all exports to the US.

In textile, India may have an advantage as its rivals Bangladesh, Vietnam, Cambodia, Pakistan, China and Sri Lanka have been slapped with higher tariffs. The US buys over USD 36 billion textiles from India, which is around 30 per cent share of India's exports.

India is working on a Bilateral Trade Agreement (BTA) with the US which is targeted to be rolled out by late 2025. Possibly higher defence and oil/gas imports from the US could help negotiate a favourable treaty but pressure to reduce agri import duties may be a political hot potato.

Analysts said the imposition of very high reciprocal tariffs by the US will likely lead to lower global and US GDP growth and higher global and US inflation.

The commerce ministry in a statement said discussions are ongoing between Indian and US trade teams for the expeditious conclusion of a mutually beneficial, multi-sectoral Bilateral Trade Agreement (BTA).

But that deal may take at least a few months to conclude.

The BTA will cover a wide range of issues of mutual interest including deepening of supply chain integration.

The ongoing talks are focused on enabling both nations to grow trade, investments and technology transfers.

"We remain in touch with the Trump administration on these issues and expect to take them forward in the coming days," it said.

It added that India values its Comprehensive Global Strategic Partnership with the United States and is committed to working closely with the US for the benefit of the people of both the countries.

While Macquarie said there is downside risk to the GDP projection of 6.7 per cent by RBI for 2025-26 fiscal, Morgan Stanley saw a downside risk of 30-60 bps on its growth estimate of 6.5 per cent for the current fiscal.

Aditi Nayar, Chief Economist, Head - Research & Outreach, ICRA Limited, said the impact of the tariff announcements is negative for some sectors such as steel, non-ferrous metals, auto components and cut and polished diamonds.

"In our view, this poses a mild downside risk to our growth forecast. However, we suspect that the relative tariff scenario is going to continue to evolve as the year progresses. For now, we are maintaining our baseline GDP growth forecast of 6.5 per cent" for the fiscal year that started on April 1.

Goods from India are already facing a 25 per cent tariff on steel, aluminium, and auto. For remaining products, India is subject to a base line tariff of 10 per cent between April 5-8. After that, the tariff will rise to country-specific 27 per cent starting April 9.

Explaining the imposition of the additional duty, an official said if product 'A' faces 5 per cent duty in America at present, it will be 15 per cent on April 5 and 32 per cent from April 9.

The official said that these tariffs were a "mixed bag and not a set back" and the commerce ministry is analysing the impact of this reciprocal tariff.

"The ministry is analysing the impact of the announced tariffs. India's position remains comparatively more favourable than that of its competitor nations even after imposition of these duties in labour intensive sectors like textiles," the official said, adding, there is a provision that if a country would address the concerns of the US, the Trump administration can consider reducing the duties against that nation.

Goods in transit would not be subjected to these duties, the official clarified. PTI RR YAS ANZ HVA

Source: PTI