US imposes reciprocal tariffs on India, seeks to address trade imbalances

US President Donald Trump announced on April 2 that the US would impose a 27% reciprocal tariff on India.

This tariff, lower than those on China (34%) and Vietnam (46%), is expected to give India a competitive edge in the American market, potentially shifting trade dynamics in its favor.

The decision, which comes as part of a broader strategy to address trade imbalances, will also impact other Asian countries, with tariffs on Thailand (36%) and Indonesia (32%) being higher.

However, India’s tariff is still more substantial than those of several other nations, including Japan, South Korea, and the European Union.

India’s tariff, however, is higher than those of several Asian peers, including Thailand (36%) and Indonesia (32%), both of which are increasingly integrating with China’s supply chain.

Yet, it remains lower than tariffs on countries such as Japan (24%), South Korea (25%), Malaysia (24%), the European Union (20%), and the UK (10%).

Notably, Taiwan, a key player in chip manufacturing, faces a 32% tariff.

A White House fact sheet revealed that the US will impose a 10% tariff on all countries starting April 5.

However, from April 9, individual higher tariffs will be levied on countries with which the US has the largest trade deficits.

These tariffs will remain in effect until President Trump decides that the trade deficit or non-reciprocal treatment is addressed.

Trump explained the decision by highlighting the US’s longstanding trade imbalance with India, saying, “The Indian Prime Minister just left. He’s a great friend of mine, but I said, ‘You’re a friend of mine, but you’re not treating us right.’ They charge us 52%, and we have charged them almost nothing for years and years.”

He further added, “We are only charging half the tariffs that other countries are imposing.”

Ajay Srivastava, a former trade officer and head of the GTRI think tank, viewed the higher tariffs on several Asian countries, including China, Vietnam, and Taiwan, as an opportunity for India to strengthen its position in global trade and manufacturing.

“With the US setting a relatively lower reciprocal tariff rate of 27% on Indian goods, compared to 54% on China, 46% on Vietnam, 37% on Bangladesh, and 36% on Thailand, India gains a natural competitive advantage in several key sectors,” Srivastava said.

A key area of opportunity, Srivastava noted, is textiles and garments. The high tariffs on Chinese and Bangladeshi exports could allow Indian manufacturers to capture market share, attract relocated production, and increase exports to the US.

India’s strong foundation in textile production, combined with lower tariffs, could drive new investments and greater global demand in the sector.

Trump also referenced the US Trade Representative (USTR) report, criticizing the trade practices of countries that have historically imposed significant barriers to US products.

“For decades, the United States has been slashing our trade barriers for other countries, while those nations placed massive tariffs on our products and created outrageous non-monetary barriers to decimate our industries,” Trump said.

The USTR report on trade barriers had previously highlighted India’s high applied tariffs on various goods, such as vegetable oils, apples, motorcycles, and automobiles.

It also pointed to India’s flexibility in adjusting tariffs unpredictably, creating uncertainty for US stakeholders.

Additionally, the report flagged India’s import regulations on milk, pork, and fish, citing the requirement for genetically modified-free certificates without scientific justification.

The ongoing trade tensions reflect the broader issue of agricultural support programs. While the US has long criticized India’s agricultural subsidies, Indian officials argue that US subsidies for farmers are far higher.

These ongoing discussions highlight the persistent trade concerns between the two nations, with both sides continuing to assert their economic positions on the global stage.