Explained | Trump tariffs against India

New Delhi: The US has announced 27 per cent reciprocal tariffs or import duties on Indian goods which will enter American markets.

Industry players and experts have stated that the duties will pose challenges for Indian goods but India's position is comparatively more favourable than that of its competitor nations.

Here is a list of Q & As (questions and answers) to explain these issues and implications of the US move:

Q. What are tariffs?

A. These are customs or import duties imposed on the import of goods. The importer has to pay this duty to the government. Normally, companies pass on these taxes to end users.

Q. What are reciprocal tariffs?

A. They are imposed by countries to counter increases in duties or high tariffs by trading partners -- a kind of tit-for-tat tax.

Q. How much tariffs are imposed by the US on India?

A. 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. Then the tariff will rise to country-specific 27 per cent starting April 9. Over 60 countries are affected by the measures.

Q. Why has the US announced these tariffs?

A. According to America, these taxes will help boost domestic manufacturing in the US and cut the trade deficit. The US is facing huge trade imbalances with countries, especially with China. With India, the US has a trade deficit of $35.31 billion in goods in 2023-24.

Q. Which all sectors are exempted from these tariffs?

A. These include essential and strategic items such as pharmaceuticals, semiconductors, copper, and energy products like oil, gas, coal, and LNG, according to analysis of think tank GTRI.

Q. What will be the impact of these tariffs on India?

A. According to a government official, the commerce ministry is analysing the impact of the 27 per cent reciprocal tariffs imposed by the US on India. However, it is a mixed bag and not a setback for India.

Apex exporters body FIEO said that the duties pose challenges for domestic players but India's position remains comparatively more favourable than that of its competitor nations.

The exporters said that the proposed Bilateral Trade Agreement will help domestic industry to overcome the possible impact of these duties.

GTRI said that overall the USA's protectionist tariff regime could act as a catalyst for India to gain from global supply chain realignments. However, to fully leverage these opportunities, India has to enhance its ease of doing business, invest in logistics and infrastructure, and maintain policy stability, it added.

Q. What is the Trade agreement between India and US?

A. During the visit of Prime Minister Narendra Modi to Washington in February, both the countries announced negotiations of this agreement with an aim to increase the bilateral trade to $500 billion by 2030. They are aiming at finalising the first phase of this pact by fall (September-October) of this year.

Q. What is a trade agreement?

A. In such pacts, two trading partners either significantly reduce customs duties or eliminate them on maximum number of goods traded between them. They also ease norms to promote trade in services and investments.

Q. What are the tariffs announced by the US on India's competitor countries?

A. 54 per cent on China, 46 per cent on Vietnam, 37 per cent on Bangladesh, and 36 per cent on Thailand.

Q. Are these reciprocal tariffs WTO compliant?

A. According to international trade expert Abhijit Das, these duties clearly violate the World Trade Organisation (WTO) rules. He said it breaches both MFN (most favoured nation) obligations and the bound rate commitments and a WTO member country has all the right to go against these duties in the WTO's dispute settlement mechanism.

Q. What is the bilateral trade between India and the US?

A. From 2021-22 to 2023-24, the US was India's largest trading partner. The US accounts for about 18 per cent of India's total goods exports, 6.22 per cent in imports, and 10.73 per cent in bilateral trade.

With America, India had a trade surplus (the difference between imports and exports) of $35.32 billion in goods in 2023-24. This was $27.7 billion in 2022-23, $32.85 billion in 2021-22, $22.73 billion in 2020-21, and $17.26 billion in 2019-20.

In 2024, India's main exports to the US included drug formulations and biologicals ($8.1 billion), telecom instruments ($6.5 billion), precious and semi-precious stones ($5.3 billion), petroleum products ($4.1 billion), gold and other precious metal jewellery ($3.2 billion), ready-made garments of cotton, including accessories ($2.8 billion), and products of iron and steel ($2.7 billion).

Imports included crude oil ($4.5 billion), petroleum products ($3.6 billion), coal, coke ($3.4 billion), cut and polished diamonds ($2.6 billion), electric machinery ($1.4 billion), aircraft, spacecraft and parts ($1.3 billion), and gold ($1.3 billion).