DPG Policy Brief
The Trump Tariffs and India
Authors Dr. V.S. Seshadri, I.F.S (Retd.)
Date: April 14, 2025
This policy brief outlines and analyses the multitude of tariffs announced by President Donald Trump since assuming office, which have deeply impacted the economic prospects of countries across the globe. Tariff reversals, exceptions and frequent changes have further heightened uncertainty in the world economy.
In particular, the brief focusses on Trump’s ‘Reciprocal Tariff Plan’ announced on April 2, which imposed country-specific additional tariff rates, including on India, based on the trade balance each country had with the US in the year 2024. The US administration has paused these tariffs for ninety days on April 9, following sharp declines and volatility in US and world financial markets. However, a baseline additional tariff of 10% has been applied for all countries, even as some exceptions have subsequently been made. These tariffs are aside from the high tariff rates of 25% announced in respect of specific strategic products like steel, aluminium, autos and auto-parts based on national security grounds.
The author analyses the drivers behind President Trump’s tariff plan and what he may be seeking to achieve. He also examines how the newly imposed tariffs may impact India’s trade prospects. Moreover, while these tariffs have not made any distinction between third countries, whether allies, friends or foes, China, which has retaliated to the Trump tariffs, has seen US counter-retaliations that have in effect ruled out any meaningful trade between these two leading economies across a substantial set of products.
The brief underlines the importance of negotiating and concluding the first tranche of a Bilateral Trade Agreement (BTA) that was agreed to during PM Narendra Modi’s timely summit meeting with President Trump on February 13 this year. The BTA can significantly reduce the tariff impact, while also mitigating the prevailing uncertainty for bilateral trade with the US, India’s largest export partner.
The brief points out the importance of finalising the terms of reference for these negotiations as early as possible, and then arriving at a mutually beneficial deal. What could be India’s objectives in making such a deal are examined in some detail, while what interests the US may seek to pursue are also dwelt upon, along with how we could respond to them.
The brief further stresses the need to ensure adequate safeguards, so that the imports that have been restrained by the US from third countries do not get diverted to the Indian market and hurt our domestic industry.
The author concludes that even as India pursues these BTA negotiations, while also carrying forward the ongoing FTA negotiations with the UK and the EU, it would be important to focus on improving the ease of doing business in India that can help maximise gains. At the same time, he cautions against any additional moves to reduce India’s tariffs until these negotiations are successfully concluded.
To read this DPG Policy Brief Vol. X, Issue 13, please click “The Trump Tariffs and India”.
In particular, the brief focusses on Trump’s ‘Reciprocal Tariff Plan’ announced on April 2, which imposed country-specific additional tariff rates, including on India, based on the trade balance each country had with the US in the year 2024. The US administration has paused these tariffs for ninety days on April 9, following sharp declines and volatility in US and world financial markets. However, a baseline additional tariff of 10% has been applied for all countries, even as some exceptions have subsequently been made. These tariffs are aside from the high tariff rates of 25% announced in respect of specific strategic products like steel, aluminium, autos and auto-parts based on national security grounds.
The author analyses the drivers behind President Trump’s tariff plan and what he may be seeking to achieve. He also examines how the newly imposed tariffs may impact India’s trade prospects. Moreover, while these tariffs have not made any distinction between third countries, whether allies, friends or foes, China, which has retaliated to the Trump tariffs, has seen US counter-retaliations that have in effect ruled out any meaningful trade between these two leading economies across a substantial set of products.
The brief underlines the importance of negotiating and concluding the first tranche of a Bilateral Trade Agreement (BTA) that was agreed to during PM Narendra Modi’s timely summit meeting with President Trump on February 13 this year. The BTA can significantly reduce the tariff impact, while also mitigating the prevailing uncertainty for bilateral trade with the US, India’s largest export partner.
The brief points out the importance of finalising the terms of reference for these negotiations as early as possible, and then arriving at a mutually beneficial deal. What could be India’s objectives in making such a deal are examined in some detail, while what interests the US may seek to pursue are also dwelt upon, along with how we could respond to them.
The brief further stresses the need to ensure adequate safeguards, so that the imports that have been restrained by the US from third countries do not get diverted to the Indian market and hurt our domestic industry.
The author concludes that even as India pursues these BTA negotiations, while also carrying forward the ongoing FTA negotiations with the UK and the EU, it would be important to focus on improving the ease of doing business in India that can help maximise gains. At the same time, he cautions against any additional moves to reduce India’s tariffs until these negotiations are successfully concluded.
To read this DPG Policy Brief Vol. X, Issue 13, please click “The Trump Tariffs and India”.
