In a historic measure to counter higher duties on American products imposed globally, US president Donald Trump announced reciprocal tariffs on around 60 countries. While India levies a 52% average import tariff on American goods, the US has now imposed a 27% discounted tariff on India's goods imported by the US. However, pharma and semiconductor exports from India are exempted from the reciprocal tariff. The rupee slumped 26 paise to 85.78 against the US dollar in early trade on Thursday. Meanwhile, the Indian ministry of commerce is analysing the impact of 27% reciprocal tariffs or import duties imposed by the US
President Trump signed the executive order titled 'Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits' in the White House's Rose Garden, describing it as 'Liberation Day' and 2 April 2025 as the day 'American industry was reborn'.
Mr Trump says, according to the WTO (World Trade Organization), the US has among the lowest simple average most-favoured-nation (MFN) tariff rates in the world at 3.3%, while many of its key trading partners like Brazil (11.2%), China (7.5%), EU (5%), India (17%) and Vietnam (9.4%) have simple average MFN tariff rates that are significantly higher.
Moreover, these average MFN tariff rates conceal much larger discrepancies across economies in tariff rates applied to particular products, president Trump says. For example, he says the US imposes a 2.5% tariff on passenger vehicle imports (with internal combustion engines), while the EU (10%), India (70%), and China (15%) impose much higher duties on the same product. For network switches and routers, US imposes a 0% tariff, but for similar products, India (10%) levies a higher rate. Brazil (18%) and Indonesia (30% ) impose a higher tariff on ethanol than does the US (2.5%). For rice in the husk, the US MFN tariff is 2.7% (ad valorem equivalent), while India (80%), Malaysia (40%), and Turkey (an average of 31%) impose higher rates. Apples enter the US duty-free, but not so in Turkey (60.3%) and India (50%), he added.
Many of the targeted countries are treaty allies of the US, but president Trump says friends have been more unfair to the US on matters of trade than foes, reiterating his long-running beef with countries with high trade surpluses with the US or those that he has perceived levy high import duties on American goods.
The executive order mentions the tariffs India charged on US products. A fact sheet issued by the White House on reciprocal tariffs also includes similar tariffs that India imposes on US goods.
US has announced 27% reciprocal tariffs on India, saying New Delhi imposes high import duties on American goods, as the Trump administration aims to reduce the country's trade deficit and boost manufacturing.
Reading out the new levies from a chart brought up to him by secretary of commerce Howard Lutnick at the presentation, president Trump says, "India very, very tough. The prime minister (PM) just left and is a great friend of mine, but you are not treating us right. They charge us 52% and we charge them almost nothing."
The US president was referring to PM Narendra Modi's visit to the White House in February.
In 2024, the bilateral trade between India and the US was worth US$124bn (billion). India's exports to the US reached US$81bn, while imports from the US stood at US$44bn, giving India a trade surplus of US$37bn.
Reading out from the chart, Mr Trump said the Chinese levy on US imports added up to 67%. "So we are going to be charging a discounted reciprocal tariff of 34%, I think. In other words, they charge us, we charge them, we charge them less."
Vietnam, he said, had 'great negotiators, great people'. "They like me. I like them. The problem is they charge us 90%. We are going to charge them 46% tariff."
Accusing Taiwan of taking all the computer chips and semiconductors business from the US, Mr Trump says, "We used to be the king, right? We were everything. We had all of it. Now we have almost none of it, except the biggest company is coming in. They are going to have, we are going to end up with almost 40% (reciprocal tariff)."
Impact on India
The move is expected to impact India's exports to the US. However, experts say that India is better-placed than its competitors who also face increased levies.
India is a major supplier of generic medicines to the US, with exports growing steadily. Pharmaceuticals exports from India to the US were worth US$12.72bn in 2024, contributing over 15% to the overall Indian exports valued at US$81bn. The US imposes no import duty on Indian drugs, reflecting that country's reliance on affordable generics. According to the India Brand Equity Foundation (IBEF), 31.5% of India's pharmaceuticals exports in 2024 went to the US.
According to SC Ralhan, president of the Federation of Indian Export Organisations (FIEO) despite the tariffs, certain sectors in India, including apparel, gems and jewellery, leather, electronics, chemicals, plastics, and furniture, may experience a diversion of exports, potentially offsetting some adverse effects.
"While these tariffs do present challenges, India's position remains comparatively favourable. For instance, Vietnam faces a 46% tariff, China 34%, and Indonesia 32%, placing India in a relatively better position than key competitors such as Vietnam, China, Indonesia, Bangladesh, Sri Lanka, and Myanmar," he said.
