Is it true that India levies higher import tariffs on US imports?
Yes, it is true. India’s surplus in trade with the US has risen from $7 billion in 2000 to $45 billion in 2024., data from SBI Research shows.
India’s tariffs on overall imports from the US have grown from 11.6% in 2019 to 15.3% in 2022. US tariffs on overall imports from India have remained stable, rising slightly from 2.7% to 3.8% in the same period.
What tariff threats has Trump handed out so far?
US President Donald Trump has so far threatened to impose tariffs on specific countries, but has also talked of reciprocal tariffs for all countries with which the US trades. Soon after assuming office, he imposed a 25% tariff on goods imported from Canada and Mexico but has deferred the levy till next month. Trump imposed a blanket 10% tariff on goods the US imports from China.
Has India seen any impact yet?
The US is yet to impose tariffs on Indian goods, though Trump has ratcheted up sentiment against India, referring to the Asian nation as having among the highest tariffs in the world. He has repeatedly cited India’s high import duties on automobiles, especially with reference to the Harley-Davidson brand of motorcycles.
Currently, observers point to a lack of accuracy in data assumed by the US with respect to India. As an example, Global Trade Research Initiative founder Ajay Srivastava says: “Trump is unlikely to act on specific product level tariffs, because the US has not cared to check accuracy of data. He has referred to US’s trade deficit of $100 billon with India, while in reality, it is only in the $40 billon range. On Harley-Davidson motorcyles too, his tariff assumptions have been erroneous.”
Which sectors should brace for impact?
Among the top export sectors for India, the US market has significant share (mostly in the region of 30%) in readymade garments and cotton, products of iron & steel, gold and precious stones & jewellery and in drug formulations. Overall, the US share of India’s exports is 17.7%.
Within agriculture, Indian farm exports would be hit hardest, with shrimp, dairy, and processed foods facing tariffs of up to 38%, says GTRI. Among industrial goods, pharmaceuticals, diamonds & jewellery, and electronics face major risks.
Sectors such as petroleum, minerals, and garments may be unaffected due to existing U.S. tariffs, says Srivastava.
The US’s share in India’s pharmaceuticals exports is about 38% and we exported $8 billion worth to America in FY24.
Addressing the media along with Donald Trump, EV maker Tesla founder Elon Musk confirmed that India has 100% import duties on fully-built cars. India’s automobile exports don’t figure in the list of principal exports to the US but India exported $6.79 billion worth auto components to the US in FY24, according to data from India’s Auto Component Manufacturers’ Association. India imported $1.63 billion worth components from the US in FY24.
GTRI’s Srivastava warns that India should not cut tariffs on automobile imports. “In auto, the tariff differential is 22-23%. But as the auto sector contributes to 14-15% of GDP and to one-third of manufacturing GDP, we have to protect domestic firms’ interests.”
In mid-February, the US president had said he would impose 25% tariffs on pharmaceuticals, semiconductors and automobiles across countries that the US trades with.
How will US tariffs impact India’s exports and GDP?
A note by SBI Research says that for a tariff of 15%, export value could decline by about 3% – this takes into account exchange rate depreciation too. It adds that if the US levies 20% tariff across all items, an unlikely scenario, India’s GDP impact would be 0.5 percentage points.
An analysis by Goldman Sachs shows that India has a higher effective tariff rate of 6.5 percentage points (pp) vis-a-vis the US. This is at a country level. Seen at the level of individual products, India has higher effective tariff of 11.5 pp. The differential is highest in agricultural products, pharmaceuticals and textiles.
Depending on whether the Trump administration increases effective tariffs by 6.6 pp or 11.5 pp, the impact on India’s GDP could be 0.1-0.6 percentage points.
Source: Goldman Sachs Economics Research
What should India do?
The GTRI says India must identify tariff lines where India can eliminate tariffs for U.S. imports without harming domestic industries and agriculture. We may exclude most agriculture lines from this list. To prepare such list, India can refer to its FTA tariff offers to Japan, Korea, and ASEAN as a starting point. This list should be discussed with the U.S. before April, ahead of its reciprocal tariff announcement. It will be like doing quick Goods FTA and if the US accepts, reciprocal tariff may be very low or near zero for India.
“Though the zero for zero tariff strategy violates WTO rules, it is less harmful compared to negotiating a full FTA, which could force India to make difficult concessions, such as opening government procurement to U.S. firms, reducing agriculture subsidies, weakening patent protections, and removing data flow restrictions—all of which India is not prepared to accept.”
Would non-tariff barriers by countries count in US’s retaliatory measures?
Yes. The United States Trade Representative had observed that India’s non-tariff barriers included: “opaque and unpredictable nature of quantitative import restrictions; onerous process of obtaining import licenses for remanufactured goods; customs barriers leading to higher costs due to administrative discretion in valuation criteria; medical device price controls; ethanol import restrictions; domestic agricultural subsidies which distort markets; technical barriers to trade including quality control orders for chemicals & other materials, alcoholic beverage-related regulations; mandatory domestic testing and certification requirements for equipment; sanitary and phytosanitary barriers involving agricultural biotechnology, non-genetically modified crops, dairy products, alfafa hay, poultry, grains and pulses etc. Remains on Priority Watch List due to IP concerns.”