In a significant move, US President Donald Trump announced that "reciprocal tariffs" would be applied to imports from a number of countries, including India

Important Points of Reciprocal Tariffs

Declaration of "Liberation Day": Trump declared April 2, 2025, to be "Liberation Day," which signaled the imposition of reciprocal tariffs intended to address trade imbalances.

Baseline Tariff: All imports were subject to a uniform 10% tariff, with higher rates applied to countries that have significant trade surpluses with the US. Exports to the United States were subject to tariffs ranging from 10% to 50%. Textiles, chemicals, machinery, and electronics were the main industries affected.

Country-Specific Tariffs: China was subject to a 34% tariff, the European Union to a 20% tariff, Japan to a 24% tariff, Taiwan to a 32% tariff, and India to a 26% reciprocal tariff.

Economic Justification: The purpose of these tariffs was to address non-monetary trade barriers, such as currency manipulation, and to close trade deficits.

Effects on India

Export Challenges: India faced a 26% tariff on its exports to the US, which had a major impact on important industries like textiles, cars, and fishing. Indian exporters faced difficulties as a result of this circumstance, including higher expenses and a decline in their ability to compete in the US market.

Economic Adjustments: India may consider reducing tariffs on U.S. imports, especially those involving jewelry, gems, and auto parts, in order to lessen the effects.

Strategic Alliances: India is reiterating its commitment to strengthening bilateral trade relations with the United States in order to promote long-term economic cooperation, despite the tariffs.

Comparative Benefits: India's 26% tariff is less than that of other Asian and South Asian countries like Vietnam (46%), Thailand (37%), Bangladesh (37%), Sri Lanka (44%), and Pakistan (30%), potentially providing India with certain ‘comparative advantages.’.

India's Affected Sectors

Electronics Sector: The recently implemented US tariffs could have a negative impact on India's $14 billion in electronics exports.

Gems and Jewellery: Over $9 billion in exports may be affected as well. Aluminum and auto parts are exempt from the new 26% tariff, but they still have to deal with the 25% tariff that Trump imposed earlier.

Pharmaceuticals & Energy Products: The most recent tariffs do not apply to approximately $9 billion in pharmaceutical exports, and energy products are also exempt.

Effects on the World Environment

Global Trade Tensions: With tariffs rising to 54%, countries like China, Vietnam, and the European Union are subject to even higher rates. Trade tensions and worries about a possible world trade war have increased as a result of this circumstance.

Market Volatility: The tariffs have caused significant market volatility, which has caused global stock indices to drop precipitously. Businesses that rely on global supply chains are facing cost increases and disruptions.

Retaliatory Measures: A number of nations have imposed counter-tariffs on American goods, which has further complicated trade relations between nations.