Terming April 2 as America’s “Liberation Day,” U.S. President Donald Trump has announced a 10% baseline tariff across the board and retaliatory reciprocal tariffs on some of the country’s closest allies and partners.
Approximately 60 countries with significant trade surpluses against the US will be subject to these tariffs, including India, whose prime Minister, Narendra Modi, is, according to Trump, his “very good friend.”
Reportedly, Indian officials have described Trump’s announcement as a “mixed bag,” something that is both a challenge and an opportunity.
More importantly, there is a school of thought in India that says New Delhi could manage its losses in Trump’s America by finding alternate markets in North America, particularly in Mexico and Canada.
How exactly is Trump’s announcement going to hurt Indian exports to America?
As it is, Trump’s universal 10% tariff on all countries is due to take effect on April 5th, while the reciprocal tariffs targeting countries with large surpluses in their bilateral trade with America will start on April 9th.
In calculating the reciprocal rates, Trump has suggested that he had weighed each country’s tariffs against America, along with other measurements, including currency manipulation and trade barriers, before dividing the figure roughly in half. As a result, China will see tariffs of at least 54% since its reciprocal rate will stack on top of its existing levies.
It is calculated that the European Union will face tariffs of 20%, Japan’s 24%, India’s 26%, and Vietnam’s 46%.
Experts point out that Trump’s actions are in direct conflict with many of the World Trade Organization’s (WTO) rules and regulations. They are against the WTO’s Most-Favored Nation (MFN) Principle, which mandates that tariffs must be applied equally to all trading partners. WTO rules prohibit countries from imposing unilateral tariff hikes such as Trump’s.
It may be noted that developing countries like India are permitted higher tariff protections under WTO rules. These tariffs help shield their emerging industries from foreign competition, promote self-sufficiency, and regulate trade imbalances.
But the Trump Administration seems to have overridden these provisions. Its dubious argument is that while the U.S. maintains relatively low tariffs, other countries impose higher duties and trade barriers on American goods, resulting in a disparity of more than US$ 1 trillion trade deficit, harming American industries and workers.
As far as India is concerned, following its liberalization of the economy in the early 1990s, the United States has emerged as its most significant single-country trade partner.
For instance, in the year 1992, the US accounted for 16.4% of India’s total exports. But by 2000, this share peaked at 22.8%. Covid brought the figure down, but it has registered steady progress in the last three years, growing to US $77.5 billion in FY (financial year) 2024.
Against this background, the Trade Council of India has brought out a significant study by its Joint Director Virat Bahri, Research Associate Nehchal Singh and Research Assistant Dilshad Khan.
It has summarised the Indian export items to the U.S. that will now be classified under the High-Risk category, Moderate-risk category, and Low-Risk category based on the tariff differential (calculated as the ad valorem tariff imposed by India on US imports minus the ad valorem tariff imposed by the US on Indian imports) and the US share in India’s global exports of the commodities concerned.
High-Risk category (Tariff Differential ≥ 30% & US Share > 10%) items include vehicles (other than Railway) & parts [that fetched 2,647.57 million dollars but the tariff differential ( (India > U.S.) of 73, with U.S. share being 2.67 percent]; Preparations of Meat, Fish, Crustaceans, Molluscs [fetched 585.34 million dollars, with the tariff differential of 47, with U.S. share being 80.64 percent]; Fish & Crustaceans, Molluscs (fetched 1,903.86 million dollars, with the tariff differential of 30 and the U.S. share being 31.09 percent].
Moderate-Risk Products (Tariff Differential ≥ 7% & US Share > 25%) happen to be carpets & other Textile Floor Coverings [fetched 1,088.01 million dollars, with tariff differential of 8 and U.S. share being 58.01]; Furniture, Bedding, Mattresses, Lamps [ 1,100.85 of million dollars, tariff differential of 10 and U.S. share of 45.55 percent ]; Articles of Stone, Plaster, Cement, Asbestos, Mica [ of 864.19 million dollars, with tariff differential of 10 and U.S. share of 41.69 percent]; Pharmaceutical Products [ 8,079.95 million dollars, U.S.tariff differential of 10 and U.S. share of 36.55 percent ]; Natural or colored pearls [ 9,948.50 million dollars, U.S. tariff differential of 11 and U.S. share of 30.28 percent]; Articles of Iron & Steel[ 2,793.57 million dollars, with U.S. tariff differential of 10 and U.S. share of 28.11 percent]; and Leather, Saddlery, Handbags [682.23 million dollars, with tariff differential of 7 and U.S. share of 27.88 percent].
Of course, it needs to be noted here that the White House has spared India’s pharmaceutical sector, which exported more than $8 billion of products to the United States in the 2024 fiscal year. As of now, it is exempt from its reciprocal tariff move.
Then, there are the Low-Risk products for US $37 billion (Tariff Differential < 7% OR US Share < 25%) that include 12 broad categories of items, the most important being Electrical Machinery & Equipment [11,081.13 million dollars, with tariff differential of 5 and U.S. share of 32.2 percent].
However, while the U.S. may become the most important destination for Indian exports, India figures insignificantly in U.S. exports compared to its share in India’s exports. While the US accounts for nearly 18% of India’s total exports, India’s share in US exports is considerably lower, less than 2%, as estimated in 2024.
Obviously, India has reasons to worry. However, Indian industry leaders have noted that many countries they compete with globally, including China, Indonesia, and Vietnam, have been hit harder than them. So, Trump still considers India to be a friendly country and will reconsider its policy, it is said.
After all, so runs the argument that reciprocal tariff issues would be mutually resolved once the trade agreement between India and the United States is concluded in a few months’ time, which has been promised by both President Trump and Prime Minister Modi.
It will address critical questions about the impact on India’s exports and market access to the U.S. and could offer a pathway to tariff reductions, improved market entry, and strategic sectoral gains for India.
Secondly, it is argued that since Canada and Mexico will be hit very hard by Trump’s policies, these two countries could find Indian exports to be good replacements for the American items that they are importing at the moment.
The Trade Council of India study explains, among other things, how India’s growing automotive and engineering sectors position it well to capitalize on the sharp decline in US vehicle and machinery exports to Mexico and Canada.
The same could be the case with India’s expanding refining capacity, India’s electronics and precision instrument industries, India’s globally competitive pharmaceutical industry, increased shipments of plastic products and steel components, and growing agribusiness exports (given Mexico’s high dependency on US cereals and meat).
While India may not fully replace U.S. exports in these categories, it can strategically increase its market share in these nations by leveraging competitive pricing, existing trade agreements, and supply chain efficiencies, the study says, adding “the trade diversion effect suggests that Indian exporters should focus on scaling up production and meeting quality standards to capitalize on the shift in trade dynamics resulting from the US tariff hikes.”
In sum, the question is whether the Indian industry will be able to convert the tariff challenges from the U.S. into opportunities to strengthen India’s position in global trade and manufacturing. Only time will tell.
- Author and veteran journalist Prakash Nanda is Chairman of the Editorial Board of the EurAsian Times and has been commenting on politics, foreign policy, and strategic affairs for nearly three decades. He is a former National Fellow of the Indian Council for Historical Research and a recipient of the Seoul Peace Prize Scholarship.
- CONTACT: prakash.nanda (at) hotmail.com
