Bhubaneswar: Trump tariff hit like an avalanche to the global trade order Thursday as the US President has made good of his election promise by slapping sweeping tariffs against United States major trade partners, including India.
As per the tariffs announced Wednesday, President Trump has announced levying 27% reciprocal tariff on Indian merchandise exports to US. Along with India, the reciprocal tariffs have been levied on exports to US from as many as 57 countries.
The US President has announced reciprocal tariff policy on all trading partners invoking the IEEPA (International Emergency Economic Powers Act) 1977.
The White House release stated that President trump has invoked IEEPA to address national emergency posed by large and persistent trade deficit with US. The release also mentioned that US exports to the countries are subjected to harmful policies like ‘currency manipulation’ and ‘exorbitant VATs (value-added taxes) by many countries.
It needs mentioning that over and above the reciprocal tariffs announced by the US President, from April 5, all exports to US will see levy of 10% ad valorem duty (means a 10% on the exported goods value).
TRUMP TARIFF COUNTRY WISE
President Trump tariff hit China and Vietnam the most as US exports to the countries are taxed heavily. China taxes on US goods have been as high as 67%, whereas Vietnam levies 90% taxes on US goods.
Accordingly, a reciprocal tax of 46% has been levied on Vietnam and 34% on China.
The reciprocal tariff levied on India has been 27%. The white House list released on X shows 26%, but the PDF released puts it at 27%. (view both the lists given below)
Moreover, President Trump has slapped a 25% tariff on global steel imports, including from India.
LIBERATION DAY RECIPROCAL TARIFFS 🇺🇸 pic.twitter.com/ODckbUWKvO
— The White House (@WhiteHouse) April 2, 2025
HOW TRUMP TARIFF IMPACT INDIA?
The average tariff US goods face in India have been estimated at around 15.30%. On the contrary, average tariff Indian goods attracted tariff in US has been 3.83%.
As per the chart shared by US White House, it shows Indian tariff the US goods attract, including currency manipulation and trade barriers, as high as 52%.
View the image that portrays tariff gap between US and India sector wise. India tariff gap has been high in agriculture sector followed by auto.
How much it impact India can be assessed from the Indian merchandise goods exported to USA.
Here is the table given below.
IMMUNE PILL
A glance at the above shows Pharma products (Drug formulations, biologicals) form the largest exported commodity from India, followed by gems and jewelleries.
According to Indian Pharmaceutical Alliance (IPA), US reciprocal tariff has excluded Indian Phrama exports to the US.
In a statement released, the IPA said, “India and US share a strong and growing bilateral trade relationship, with a shared vision to double trade to USD 500bn under the Mission 500 initiative. Pharmaceuticals remain a cornerstone of this partnership, as India plays a vital role in global and Us healthcare by ensuing a steady supply of affordable medicines.”
The statement shedding light on tariff exemption said, “The decision underscores the critical role of cost effective, life saving generic medicines in public health, economic stability and national security.”
Since India has been supplying 40% of US generic groceries, the quantum value of Indian pharma exports to US stood at $8.7bn. The Pharma exports share in India’s total exports to US has been around 31%.
The exemption has left nearly one-third of Indian exports to US unaffected from the reciprocal tariff.
However, along with Phrama, the other major merchandise exports to US have been Gems and Jewellery, which also account for nearly 30% of Indian exports to US.
TRUMP TARIFF CLOUDS THE GLOSS?
A research paper authored by Rishabh Atray and Ramya KR of IIM Tiruchirappali has stated the following assuming 29% tariff.
The Gems and Jewellery export Exposure has been estimated at around $8.5 billion, with the US serving as a major luxury market.
Tariffs Impact Impact: Although price inelasticity in luxury segments may keep volume loss to 10-15%, a 29% tax might reduce revenues by $2–$2.5 billion.
But the Reciprocal tariff levied has been 26-27%.
TRUMP TARIFF BRAKES ON VROOM?
It seems the 26-27% reciprocal tariff will be hitting the Auto exports from India hard.
Because, the sectoral exports to US from India account for around 16% of total exports. India exports car parts worth $2.5 billion to the US every year.
The IIM-T study details the impact assuming a 25% tariff. The study says an additional $625 million in expenses could result from a 25% tariff.
Losses might be anywhere from $625 million to $1.25 billion if demand declines by 25–50%.
The Domestic Ripple could be:
- A decrease in exports may result in a reduction of production in major cities such as Chennai and Pune
- The result would impact 1.5 million employments
- And reduce industrial output by 5–10%.
TEXTILES ENDURANCE SHOW?
US have been a major market for Indian textiles. The sectoral exports account for nearly 7% of total Indian exports to US. The export exposure to US has been around $5bn per year.
The 26-27% tariff will hit the sector as it would lead rise in prices of products. But the consolation factor here is Indian textiles competitors are Bangladesh and Vietnam.
In the reciprocal tariff announced Wednesday, the tariff levied on Vietnam has been 46% and Bangladesh has been 37%.
Though a slackened demand may impact the textiles exports, but the differential reciprocal tariff rates still makes Indian textile cheaper than its competitors.
However, as per IIM-T, if the textiles exports value drop by $1-1.5bn, then it will have an impact on the 2mn jobs the sector has thrown open in Gujarat and Tamil Nadu.
BOTTOMLINE: The reciprocal tariff by Trump administration has come as a mixed bag for the India’s bilateral trade with US. US have been India’s largest trading partner. US account for 17.7% of total Indian exports.
The higher tariff will have an impact on Indian economy.
The impact would have been much sharper, had the tariff plan extended to the Pharma sectors.
However, the higher tariff impact will be felt in Auto and Textiles sectors – both labour intensive industries. It will have a deleterious impact on employment scenario in the country.
But as India and US are soon going to have a bilateral trade agreement, the impact in the long run seem to fizzle out.
