The United States has enacted a broad new system of import duties, labelled “reciprocal tariffs,” on goods from nearly 60 nations. The measures, announced via executive order on April 2, 2025, by US President Donald Trump, impose additional levies ranging from 10 to 49 per cent, with the administration citing a national emergency related to foreign trade practices and their impact on domestic industry and national security.
The new tariff structure introduces a baseline 10 per cent duty effective April 5, 2025, applicable to imports from most countries. For designated nations, including major trading partners with which the US has significant trade deficits, higher, country-specific rates took effect on April 9, 2025. These additional tariffs are applied on top of existing US import duties.
India is among the countries facing these increased costs, with a 26 per cent additional levy imposed across a wide array of industrial and agricultural products. This rate is considerably higher than India’s current average trade-weighted tariff on US imports.
Prior tariff measures remain in effect, including a 25 per cent duty on steel and aluminium products implemented on March 12, 2025, and a 25 per cent tariff on automobiles and auto parts that began on April 2, 2025. Earlier, special tariffs were also imposed on key trading partners like China, Mexico, and Canada.
The tariff rollout has already intensified economic tensions, particularly with China. Following the initial US imposition of a 54 per cent additional tariff on Chinese imports (combining a “reciprocal tariff” with a prior special levy), Beijing responded with a 34 per cent reciprocal tariff on goods from the US. This triggered a rapid escalation, with the US increasing its additional impost on Chinese imports, leading to a total of 104 per cent. China subsequently raised its additional tariff to 84 per cent, prompting a further US hike to a cumulative 125 per cent (reportedly reaching 145 per cent including a fentanyl-related tariff). China has since matched the US rate, imposing a total additional tariff of 125 per cent on American goods.
While some nations, including European Union members, Japan, and Australia, had indicated potential retaliation, a temporary 90-day pause on the higher reciprocal tariffs for countries other than China has led them to defer immediate action. However, the 10 per cent baseline duty still applies during this period.
The administration characterises these “reciprocal tariffs” as a means to counter what it views as unfair trade practices and disparate tariff rates imposed on American goods by other countries. The stated aim is to level the playing field and encourage a resurgence in domestic manufacturing by incentivising companies to invest within the United States.
However, critics question the effectiveness and economic rationale of this approach. They argue that imposing higher tariffs on imports, even in response to other countries’ duties, can harm consumers through increased prices and negatively impact demand. Concerns have also been raised about the potential for significant damage to US economic growth if trading partners continue to retaliate, with one prominent economist estimating a substantial loss to the US economy.
The methodology used to determine the specific “reciprocal tariff” rates has drawn scrutiny. The administration has indicated these rates are calculated by taking into account not only existing tariffs but also the estimated tariff equivalents of non-tariff barriers, subsidies, and currency valuations in trading partner countries. This calculation, the administration suggests, reveals a higher effective burden on US exports than the imposed reciprocal tariff rate, which it frames as a discounted figure. For example, the 26 per cent tariff on India is presented as half of a calculated 52 per cent burden. However, this “discounted” rate still more than doubles India’s current average tariff rate on US imports. This opaque calculation method is also evident in tariffs applied to individual product categories.
These increased tariffs are expected to have a significant impact on various Indian export sectors, including chemicals, metals, gems and jewellery, engineering goods, automobiles, and food products. Despite these challenges, India may find its position relatively improved compared to some key Asian competitors, such as China, Vietnam, Thailand, and Bangladesh, who face considerably higher reciprocal tariff rates on their exports to the US. This could potentially provide India with an advantage in sectors like textiles, garments, electronics, and telecom.
Certain product categories have been exempted from the reciprocal tariffs, notably pharmaceutical formulations, energy products, and semiconductors. The exemption for pharmaceuticals is seen as a pragmatic decision, given India’s significant role in supplying affordable generic medicines to the US market.
The US has signalled that countries taking meaningful steps to address what it deems non-reciprocal trade arrangements could see a reduction or limitation in the scope of these new duties. India has already made some concessions on import taxes for certain US products and may offer more within the framework of a potential bilateral trade agreement aimed for conclusion by the end of 2025.
However, the US has also put forward substantial demands to India in trade negotiations, including reforms to agricultural support programs, allowing imports of genetically modified food, lowering agricultural tariffs, changes to patent laws related to pharmaceuticals, removal of restrictions on inventory-based e-commerce models, and increased access for US firms to government procurement, including in the defense sector. These demands represent significant policy shifts for India and are likely to be areas of contention in future trade discussions. The recent tariff actions and escalating trade tensions underscore the complex and challenging landscape of international trade relations.
