Trump tariffs – Reciprocal tariffs: India may gain competitive edge but growth, exports to be hit

It is a sweet moment and its kind of India, which was hoping to obtain a mutual tariff from the United States due to the ongoing negotiations of the BTA. However, US president Donald Trump announced a 27 % “reduced” mutual tariff in India, which will start from April 9. Before April 5, a 10 % global tariff will be imposed by the United States on all imports coming to the country.

A closer look at the mutual tariff system made by the United States shows that India is scheduled to gain a competitive advantage compared to China and Vietnam that was slapped with a tariff much higher than 34 % and 46 %, respectively. Likewise, the United States also plans to impose a 37 % tariff on Bangladesh and 36 % in Thailand. The United States will not impose any tariff on some basic and strategic elements such as medicines, semi -conductors, copper, and energy products such as oil, gas, coal and LNG. Imports of steel, aluminum and automatic relevant goods in the United States will face a 25 % tariff.

It is now understood that Indian government officials who were closely monitoring American advertisements throughout Wednesday are reviewing the impact of these policies. Although Indian exports to the United States may get a competitive advantage and can help India increase its medium to long -term manufacturing capabilities, fears abound in economic growth prospects in addition to the growth of exports in the short term.

The sources indicated that how to apply the customs tariff remains a decisive issue to understand it, which ultimately affects India’s total horizons. Fears also show a commercial stagnation in the American economy that can reach the global economy.

According to an analysis by Emkay Global Financial Services, India’s exports to the United States can decrease by 30 to 33 billion dollars, or 0.8-0.9 % of GDP by 26 %, without adjusting strikes or responses across the country.

The Macquarie report was highlighted that there are negative risks to the projection of GDP by 6.7 % by RBI for 2025-26 compared to 6.5 % in 2024-25 due to commercial wars. She said: “Note that Pharma and Semiconductors and some other sectors are exempted so far and with it is expected that BTA will be signed with us in the following part of the year, we have to see what are the effects of GDP in the end.”

The VK Vijayakumar, the largest investment strategy, Geojit Investments, noted that the biggest concern is that this will lead to a retaliatory tariff from other countries that lead to a complete commercial war, which affects global trade and global growth. “The highest infection in the United States will put the federal reserve in a narrow place; it will be difficult for the Federal Reserve to provide discounts in the expected prices by the market in 2025. The possibility of American recession by the end of 2025 has increased. This is bad news for the global economy and markets,” he stressed.

The United States is the largest commercial partner in India and the largest export market. According to the Ministry of Commerce data, India’s share in US imports increased from 0.9 % in 2001 to 2.8 % in 2023. In the same period, imports from India to the United States increased by 10.48 % compared to an increase of 4.76 % of imports from the rest of the world to the United States.

The GTRI report highlighted that imposing a mutual tariff by the United States in many Asian countries, including China, Vietnam, Taiwan, Thailand and Bangladesh, represents an opportunity for India to enhance its position in global trade and manufacturing. “However, the gains will not accumulate automatically. India needs deep reforms to enable domain production, add local value and improve the competitiveness to benefit.”

India can gain in sectors such as VIS-VIS Bangladesh clothing as well as in electronics communications and smart phone sectors, countries like Vietnam and Thailand are likely to lose the competitiveness of the cost due to the sharp American tariff.