US President Donald Trump has announced a series of reciprocal tariffs aimed at countering what he describes as years of economic exploitation by foreign nations. Declaring April 2, 2025, as “Liberation Day,” Trump stated that the new tariffs would revive American industry and restore economic dominance. Among the measures, a 26% tariff has been imposed on Indian exports, alongside higher duties on imports from China (34%), the European Union (20%), South Korea (25%), and several other countries. Trump argued that the US had historically maintained lower tariffs compared to other nations and justified the move by citing high foreign duties on American goods, particularly from India, which he claimed charged excessive tariffs on US products. He also mentioned recent discussions with Indian Prime Minister Narendra Modi, expressing dissatisfaction with India’s trade policies.
The tariffs could have a significant impact on India’s economy, particularly in sectors like chemicals, metals, and jewellery, which are highly dependent on exports to the US. Analysts estimate that the new duties could result in annual losses of up to $7 billion for Indian industries. Pharmaceutical exports, which constitute a crucial part of India’s trade with the US, along with processed seafood and medical equipment, are likely to be affected. However, financial experts argue that India’s diversified export strategy and focus on value-added products may help cushion the impact. Some reports suggest that the overall decline in Indian exports to the US could remain limited to around 3% to 3.5%, provided the tariff hikes stay within a moderate range.
In response, India is preparing to engage in trade negotiations with the US, aiming to finalize a new trade agreement by late 2025. The government is exploring measures such as trade diversification, export incentives, and improved supply chain strategies to mitigate losses. Additionally, India is considering concessions on specific US imports, including medical devices and luxury goods, as part of a broader strategy to strengthen economic ties. The country is also positioning itself as a key manufacturing hub and an alternative to China in sectors like semiconductors and renewable energy. Despite these trade tensions, global financial institutions, including the International Monetary Fund (IMF), remain optimistic about India’s economic prospects, projecting sustained growth and a strong trajectory toward becoming the world’s third-largest economy.
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