TRUMP'S RECIPROCAL TARIFFS: IMPACT ON INDIA AND THE REST OF THE WORLD

Trump's reciprocal tariffs aim to reduce the U.S. trade deficit, impacting global trade, especially for countries like India, potentially slowing growth and raising inflation.

- TDG NETWORK

On April 2, 2025, U.S. President Donald Trump, O as part of his administration's "America First" agenda, made a dramatic move by announcing a new round of tariffs on all major U.S. trading partners.

This announcement marked what the president dubbed as "Liberation Day," signifying a fresh wave of protectionism that could reshape global trade.

Trump's decision was based on the notion of balancing the scales of trade, particularly in light of the substantial U.S. trade deficit, which stands at approximately $1.2 trillion.

To put this in perspective, the U.S. imports more goods than it exports by a massive $1.2 trillion, and Trump viewed this imbalance as a critical issue requiring drastic measures. He opted for reciprocal tariffs charging trading partners equivalent tariffs to those that the U.S. faces when exporting goods to them.

This article examines the reciprocal tariffs announced by Trump, their impact on India, and how they could affect the broader global economy.

WHAT WERE THE TARIFFS?

In his speech, Trump unveiled two sets of tariffs. The first was a base tariff of 10% applied universally to all countries. This is a significant increase from the previous tariff rates, which hovered around 2.5%. This base tariff was set to go into effect on April 5, 2025, and was designed to address the trade deficit. The second set of tariffs was country-specific, designed based on the disparity between U.S. tariffs on imports and the tariffs that other countries impose on U.S. goods. These "reciprocal tariffs" were calculated by taking the difference between what the U.S. imposes on imports and what other countries levy on U.S. products, then halving that difference.