India looks at ways to navigate Trump's reciprocal tariff

New Delhi: With US President Donald Trump's threat of reciprocal tariff stoking fears of a global trade war, India is looking at finding an amicable solution to the challenge under the broader framework of a trade deal with Washington.

In his latest salvo, the US president, while addressing a joint session of the Congress on Tuesday, mentioned India alongside the European Union, China and Canada for charging higher tariffs on American products.

In line with his "America First" policy, Trump announced during the speech reciprocal tariffs from April 2 on numerous trading partners and nations that impose higher levies on imports from the United States.

He said other countries have used tariffs against the US for decades and now, it is "our turn" to start using them against those nations.

"On average, the European Union, China, Brazil, India, Mexico and Canada -- have you heard of them? And countless other nations charge us tremendously higher tariffs than we charge them," Trump said.

He added: "It is very unfair. India charges us auto tariffs higher than 100 per cent. China's average tariff on our products is twice what we charge them. And South Korea's average tariff is four times higher."

India is confident of finding a solution, people familiar with the matter said while referring to the commitment expressed by Prime Minister Narendra Modi and Trump during their February 13 talks in Washington DC.

At the meeting, the two sides agreed to negotiate a mega trade deal by the end of this year and set an ambitious target of USD 500 billion in annual trade by 2030 to narrow the trade deficit.

"Recognising that this level of ambition would require new, fair-trade terms, the leaders announced plans to negotiate the first tranche of a mutually beneficial, multi-sector Bilateral Trade Agreement (BTA) by fall of 2025," a joint statement on the Modi-Trump talks said.

To advance this innovative, wide-ranging BTA, the US and India will take an integrated approach to strengthen and deepen the bilateral trade across the goods and services sector, and work towards increasing market access, reducing tariff and non-tariff barriers, and deepening supply-chain integration, it said.

Both sides made firm commitment to boost the overall trade, and India hopes that a mutually beneficial outcome will emerge on the issue of tariffs, the people cited above said as New Delhi looks at navigating the trade landscape with the Trump administration.

Commerce Minister Piyush Goyal is in Washington this week to hold talks with his American counterpart, Howard Lutnick, and US Trade Representative Jamieson Greer on the proposed deal.

There is an expectation in New Delhi that it may escape the reciprocal tariffs being imposed by the Trump administration on February 2.

Since assuming office on January 20, Trump has on multiple occasions criticised India for higher tariffs and even described the country as a "tariff king" and "tariff abuser".

In its Union budget for 2025-26, India announced its decision to lower tariffs on the Bourbon whiskey, wines and electronic vehicle (EV) segments.

The decisions were seen as an attempt to send a signal to the Trump administration that New Delhi is open to bringing down tariffs in specific sectors.

Washington is also pushing New Delhi to buy more American oil, gas and military platforms to bring down the trade deficit that stands at around Rs 3,91,522 crore ($45 billion) in India's favour.

The US was the largest trading partner of India with the overall bilateral trade in goods and services amounting to Rs 16,53,152 crore ($190 billion) for calendar year 2023.

In the financial year 2023-24, the US was the third-largest source of foreign direct investment (FDI) in India with inflows of Rs 43,414 crore ($4.99 billion).

According to a CII study released in April 2023, 163 Indian companies had invested over Rs 3,48,016 crore ($40 billion) in the US and created over 4.25 lakh direct jobs.

Trump's policy on tariffs has triggered global concerns and stoked fears of a larger trade war.

His 25 per cent tariffs on imports from Canada and Mexico came into effect on Tuesday.

In addition, the US president has also doubled the 10 per cent tariff he announced on Chinese imports in February. It now stands at 20 per cent.