India gets temporary relief, but trade turmoil looms, says former US trade official

Less than 24 hours after implementing sweeping “reciprocal tariffs," US President Donald Trump on Wednesday announced a 90-day pause on the new duties for most trading partners, including India. 

The decision to suspend the new duties came amid turmoil in the bond market, according to Raymond E. Vickery Jr., former US assistant secretary of commerce for trade development. 

Speaking to Mint, Vickery said the cost of financing America’s rising debt—and fears of a credit crisis—prompted the White House to backtrack, at least temporarily.

Trump's announcement followed urgent appeals from more than 75 countries, according to Trump’s post on Truth Social. China, however, has been singled out for far harsher treatment, with US tariffs on Chinese exports hiked to a staggering 125%, up from the previously announced 104%.

Also read: Trump’s great tariff pause: What made him blink?

India’s inclusion in the temporary reprieve marks a critical, if short-term, breather for one of America’s top trading partners. Vickery, who was responsible for India under the US Commerce department’s Big Emerging Markets initiative, cautioned that uncertainty looms large.

“…Stability will have to be restored before progress toward international prosperity and security are resumed. Hopefully, a bilateral trade deal between India and the US can be reached to promote stability in our economic relationship," he said.

Trump’s reciprocal tariff plan—announced as part of what the White House called “Liberation Day"—initially proposed a 10% base duty on most imports, with added penalties for countries running trade surpluses with the US. For India, which recorded a $35 billion goods trade surplus with the US in FY2024, this would have translated to a 26% tariff on most goods.

GTRI sounds the alarm

According to a new study by the Global Trade Research Initiative (GTRI), such a tariff—if implemented—could cause a $5.76 billion or 6.41% decline in India’s merchandise exports to the US in 2025. Key sectors like gems and jewellery, electronics, marine products, and auto components would be hardest hit.

Of the $89.81 billion worth of Indian goods shipped to the US last year, nearly 75%—valued at $67.2 billion—would have faced the 26% duty, replacing much lower Most Favoured Nation (MFN) tariffs.

Vickery, now a senior associate at the Center for Strategic and International Studies, said the policy reflects a broader “seismic shift" in how the US engages with global trade.

“This is not just about tariff rates—it’s a fundamental change in America’s approach," he said, noting that Trump’s move signals a departure from the multilateral, WTO-led trading system. “Without US participation, it’s hard to see how the multilateral system survives," said Vickery, who held office from 1994 to 1997.

Also read: India races to wrap up free trade deals as clock ticks on Trump’s tariff window

The reciprocal tariff model is based on an opaque formula, where duties are calculated based on what the US claims other countries impose on American exports—including non-tariff barriers and currency policies, said Vickery. 

In India’s case, the US calculated a 26% rate based on an estimated 52% effective trade barrier—though Vickery dismissed the figure as a crude approximation.

“It’s less a reflection of real-world trade practices and more a mathematical shortcut," he said.

Allies prepare to hit back

Countries like China, Canada, Mexico, and the European Union have already unveiled or are preparing retaliatory measures. The EU is reportedly considering actions that could hit US tech and financial services firms, areas where Washington enjoys a large surplus.

Trump’s argument that tariffs will bolster US manufacturing and generate revenue has also drawn criticism. Vickery pointed out the internal contradiction: if imports fall due to tariffs, so too does the revenue they generate. Moreover, the US is battling labour shortages, not mass unemployment.

“It’s hard to argue that national security is being enhanced by alienating both adversaries and allies alike," he remarked.

Also read: Tariffs paused: Street preps for a party, but it's time to stay sober

As global markets digest the rollercoaster of announcements, Vickery said, “From the ashes of World War II, the world built institutions that underpinned peace and prosperity for eight decades. This tariff war threatens that legacy."  

“We can only hope the current turmoil doesn’t inflict lasting damage—and that a more resilient trading system eventually emerges.