TOUGH TIMES AHEAD

With 27 per cent US reciprocal tariffs in place, India's export loss may be limited, services exports remain unaffected, and lower tariffs offer a competitive edge. But global volatility is a big concern

- Ashish Sinha

IN A MOVE to tackle the country's persistent trade deficit, US President Donald J. Trump signed an executive order on April 2, 2025, imposing fresh tariffs on imports. Effective April 5, a blanket 10 per cent additional ad valorem duty will apply to most imported goods, with some exceptions. However, from April 9, a tougher, country-specific tariff regime will kick in, significantly affecting India. Indian exports to the US will now face a steep 27 per cent reciprocal tariff, up from 10 per cent, under the administration's “America First” trade policy. The decision overrides existing World Trade Organisation (WTO) commitments, with key exemptions for critical goods such as pharmaceuticals, semiconductors, and energy products.

How will this impact India? Experts peg different estimates of potential impact on India. According to Care Edge Ratings analysis, India's direct export loss from higher tariffs is estimated at $9-13 billion (0.2 per cent-0.3 per cent of GDP). Why? Because India's domestic-driven economy offers resilience, while lower reciprocal tariffs provide a competitive edge.

The good news is that the services exports remain unaffected, but the fear is that the global market volatility will persist. Experts hope that the potential negotiations may occur before the April 9 tariff implementation. Let’s underline a key fact that the US is India’s biggest export market, absorbing about $78 billion worth of goods annually, accounting for 18 per cent of India’s total exports in FY24. India also enjoys a $35 billion trade surplus with the US, anumber now under the lens going forward.

India in the Crosshairs