The Chairman of the 16th Finance Commission, Arvind Panagariya, on Saturday said that the looming threat of reciprocal tariffs from the US could be turned into a positive if India can leverage it to secure mutual tariff reductions.
He, however, cautioned that if it results in a tariff war, where the US imposes tariffs on India and New Delhi retaliates with its own tariffs, it would have an “unfortunate” outcome.
“We have a very good opportunity to do a win-win bargain. So we can really turn it into a win-win situation. Now that the reciprocal tariff threat is coming, it is doubly beneficial that we also, in the process, hold the United States to reciprocal tariff reductions as well, and get access for our goods that we export to them,” Panagariya said.
Panagariya was replying to a query on how he foresees the impact of US tariff volatility on India over the next 3-4 years.
US President Donald Trump has on multiple times said that America will impose reciprocal tariffs against India. He has also alleged that India is a ‘tariff king’ and ‘tariff abuser’.
The US has already announced a 25 per cent tariff on steel and aluminium. It will come into force from March 12. India also exports these goods to the US.
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In 2018, when the US imposed duties on certain steel and aluminium goods, India in 2019 imposed retaliatory duties on 29 American goods including apples.
Speaking at the 49th Civil Accounts Day, Panagariya also said that India has a “very good” opportunity to do a win-win bargain on reciprocal tariffs.
“Our own (economic) liberalisation (in 1991) makes us more competitive, forces us to become more efficient and in that process, if we were to do a reciprocal tariff bargain, we can also get better access to the US market,” he said adding sectors like textiles and clothing can get greater market access in the US.
“We can turn it (reciprocal tariffs) into a positive. If it ends up in a kind of tariff war in which the US hits us with tariffs and we hit back on the US with tariffs, that outcome will be kind of unfortunate. That will not be to the advantage of either side,” he said.
During the recent visit of Prime Minister Narendra Modi to Washington, India and the US announced their commitment to more than double the two-way commerce to $500 billion by 2030 and negotiate the first tranche of a mutually beneficial, multi-sector Bilateral Trade Agreement (BTA) by fall of 2025.
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In 2023, the US-India bilateral trade in goods and services stood at $190.08 billion ($123.89 billion in goods and $66.19 billion in services trade). That year, India’s merchandise exports to the US stood at $83.77 billion, while imports were $40.12 billion, leaving a trade gap of $43.65 billion in favour of India. The country’s services export to America was $36.33 billion in 2023, while imports were aggregated at $29.86 billion.
The trade gap (difference between imports and exports) was $6.47 billion in favour of New Delhi. During 2021-24, America was the largest trading partner of India. The US is one of the few countries with which India has a trade surplus.
In 2023-24, the US was the largest trading partner of India with $119.71 billion in bilateral trade in goods ($77.51 billion worth of exports, $42.19 billion of imports, with $35.31 billion trade surplus).
Commerce and Industry Minister Piyush Goyal will visit Washington next week. He may hold talks with US Trade Representative (USTR) Jamieson Greer and US Commerce Secretary Howard Lutnick during the visit.
