Trump’s tariff strike: India hit with 27% duty as trade war escalates

With Trump deciding to charge half of the tariffs a country imposes on American imports, Indian exports to the US face a 27% tariff. This is based on Trump’s assertion that India levies a 52% cumulative tariff on US goods. The US is India’s largest export market.

(The White House's annexure on the tariffs mentions a 27% levy for India, although Trump in his speech mentioned a 26% tariff.)

However, more trade measures are expected, as outlined in the White House fact sheet. A 10% tariff on all imports will take effect on 5 April, and starting 9 April, countries with the largest trade deficits with the US will face even higher reciprocal tariffs.

As per the White House statement, the tariffs will remain in effect until Trump determines that any trade deficit and underlying non-reciprocal policies have been addressed. However, his order allows for modifications, which means Trump can raise tariffs in response to any retaliation or lower tariffs if a trading partner takes steps to align with the US’ economic and security interests.

India’s weighted average tariff has already declined from 17% in 2023 to 10.66% following the duty cuts announced in the Union Budget for 2025-26.

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Copper, pharmaceuticals, semiconductors, lumber articles, certain critical minerals, and energy and energy products imported by the US are exempt from the reciprocal tariffs.

Trade experts said that while India’s exports will be impacted by the US tariffs, the country was relatively better positioned than some of its key competitors. They, however, cautioned that prolonged uncertainty could dampen trade sentiment, making the early conclusion of negotiations between India and the US for a bilateral trade agreement crucial for stability.

“We have to assess the impact, but looking at the reciprocal tariffs imposed on other countries, we are in a lower band. We are much better placed compared to our key competitors like Vietnam, China, Indonesia, and Myanmar," said Ajay Sahai, director general of the Federation of Indian Export Organisations.

“Hope that the BTA is concluded early to provide relief from reciprocal tariffs. In some sectors, as our competitors are worse hit we may gain as well," Sahai told Mint over phone soon after the announcement of Trump’s reciprocal tariff plan.

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Meanwhile, India's pharmaceutical sector is expected to remain insulated from reciprocal tariff increases, as it has been exempted, said Saurabh Agarwal, tax partner at EY. The disparity between tariffs imposed on India and other countries such as China and Vietnam presents a "substantial opportunity for India's manufacturing industry, particularly in telecommunications and textiles, to expand its presence in the US market", he added.

‘Not fully reciprocal’

Trump, referring to 2 April as “Liberation Day", made the tariff announcement from the Rose Garden of the White House before an audience of steel and auto workers.

He called the decision a “declaration of economic independence" and one of the most significant moments in American history, claiming the tariffs would generate “trillions and trillions of dollars" to reduce taxes and pay down the US’ national debt.

“We will charge them approximately half of what they are and have been charging us," said Trump, explaining his reciprocal tariff plan. “So, the tariffs will not be fully reciprocal."

However, he clarified that the halved figure accounted for “the combined rate of all their tariffs, non-monetary barriers, and other forms of cheating".

Trump presented a large chart outlining the reciprocal tariffs being imposed on various countries. The chart, which featured nations such as China, Vietnam, Japan, India, and Switzerland, as well as the European Union, compared tariffs and other trade costs placed on US imports with the reciprocal tariffs that will now take effect.

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Eyes on India-US bilateral trade agreement

The US’ 27% tariff on India comes amid ongoing trade negotiations between the two nations to finalise a bilateral trade agreement.

“In the lead-up to today’s announcement, there was widespread recognition that India’s import restrictions would be among the more significant targets," said Richard M. Rossow, chair on India and Emerging Asia at the Center for Strategic and International Studies, a Washington-based think tank.

“But it appears the two sides are moving fast in negotiating a trade deal that could meaningfully lessen the impact. Considering how important the US is for Indian exporters, both sides will want a good deal done quickly."

Other experts said capital flow into India could get impacted by Trump’s reciprocal tariffs.

“This cannot be viewed as a one-off event given the uncertainty around future measures by the US administration and any tit-for-tat by other countries," said Sachchidanand Shukla, group chief economist at Larsen & Toubro. “The main impact on India may be through the channel of capital flows, services exports, and Indian rupee more than trade, given that India is a large importer of foreign capital and remittances and exporter of IT/ITes services."

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Other than information technology and IT-enabled services, India’s key exports to the US include garments, engineering goods, electronics, pharmaceuticals, and gems and jewellery. These sectors together accounted for 72.7% of the total goods trade between the two countries in FY24, contributing $56.34 billion out of the overall bilateral trade of $77.52 billion.

Sectors such as semiconductors, furniture, and rubber—while smaller in volume—are also heavily reliant on US demand, with semiconductors being particularly exposed as 85% of India’s exports in this category are destined for the US.

India has already revised import tariffs on several American products to address the US’ trade concerns. The import duty on bourbon whiskey was reduced from 150% to 100%. Tariffs on Harley-Davidson motorcycles were lowered from 50% to 30%, and the duty on ethernet switches was halved from 20% to 10%.

“The announcement of a 26% ‘discounted’ reciprocal tariff on Indian exports by the US may pressure India to reassess its own tariff structures and accelerate trade negotiations, while pushing exporters to diversify markets and upgrade value chains in response," said Sunil Kharbanda, co-founder and chief revenue officer, Trezix, a software-as-a-service platform for businesses engaged in import and export trade.

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A full-blown trade war

Adding to the trade overhaul, Trump confirmed that a 25% tariff on foreign-made automobiles, announced last week, will take effect at midnight ET on 2 April (9:30 am IST on 3 April).

A full-blown tariff war is expected to hit global economic and trade growth, with the Organisation for Economic Cooperation and Development (OECD) last month expressing concern over further fragmentation of the global economy.

The Paris-based grouping of developed and developing countries said in its ‘economic outlook interim report’ in March that it expected global GDP growth to moderate from 3.2% in 2024 to 3.1% in 2025 and 3.0% in 2026, because of higher trade barriers in several G20 economies and increased policy uncertainty weighing on investment and household spending.

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