US levies steep 27% tariffs on Indian imports; New Delhi to follow wait and watch approach

New Delhi/Washington: US President Donald Trump has implemented sweeping new tariffs, imposing universal duties on all countries exporting goods to the United States. In a move that could significantly impact international trade, Trump has also levied additional steep tariffs on countries such as India, affecting a wide range of industries from shrimp to steel.

The United States has announced a 27 per cent tariff on all goods imported from India, with exceptions granted for pharmaceuticals, semiconductors, energy, and certain minerals unavailable domestically. The White House labelled India among the “worst offenders” of unfair trade practices, citing high existing tariffs and other trade barriers.

Indian exports of shrimp, carpets, medical devices, and gold jewellery are expected to face difficulties in the US market under the new tariff regime. However, Indian exporters of electronics, textiles, and pharmaceuticals may gain an advantage over competitors in other countries.

India’s energy exports, including gasoline and gasoil, remain unaffected by the tariffs. The exempted goods account for just over 25 per cent of India’s total exports to the US.

Reacting to the development, the Indian government issued a cautious response, stating that it is “carefully examining the implications” of the tariffs while also exploring potential opportunities arising from the policy shift. The Department of Commerce is actively engaging with stakeholders, including domestic industries and exporters, to assess the impact and gather feedback.

Discussions between Indian and US trade officials are ongoing, with a focus on expediting a mutually beneficial Bilateral Trade Agreement (BTA) covering trade, investments, and supply chain integration.

A senior government official, speaking on condition of anonymity, highlighted the need for patience. “As a country, we need to observe the situation closely. This is unprecedented. The US industry itself is likely to push back, and we should not rush to conclusions,” the official said.

During the announcement, Trump displayed a chart outlining tariffs imposed by different countries, including India, China, the UK, and the European Union. According to the White House, India levies 52 per cent in tariffs, including currency manipulation and trade barriers. Trump stated that the US would impose a “reciprocal” tariff of 26 per cent, though White House documents later clarified the rate as 27 per cent.

A baseline duty of 10 per cent on Indian goods will take effect on April 5, with the 27 per cent duty applied from April 9 onwards. These new tariffs are in addition to existing levies on Indian imports.

Despite concerns over the impact on Indian exports, experts suggest that India remains in a comparatively favourable position. Other major exporters such as Bangladesh (37 per cent), China (54 per cent), Vietnam (46 per cent), and Thailand (36 per cent) are facing even steeper duties.

Trump framed the move as a historic shift in US trade policy. “This is Liberation Day, a long-awaited moment,” he declared at the White House Rose Garden. “April 2, 2025, will forever be remembered as the day American industry was reborn.”

India’s goods trade surplus with the US was $35 billion in 2024. While pharma exports—valued at $12.7 billion—are currently exempt from additional duties, the automobile sector has already been affected by a 25 per cent tariff imposed earlier this year. Software exports, estimated at $103 billion in FY24, will remain unaffected by the new tariff policy.

The hardest-hit sectors include engineering goods and speciality chemicals. The automobile industry, which accounts for just $2.8 billion (roughly 3 per cent of India’s total exports to the US), also faces challenges. The gems and jewellery industry, already struggling due to changing consumer preferences and soaring gold prices, now faces further headwinds. This sector contributes $11.5 billion, or about 13 per cent of total Indian exports to the US.

Textiles may emerge as a winner, as competing nations such as Bangladesh, Vietnam, Cambodia, Pakistan, China, and Sri Lanka are subject to even higher tariffs. The US imports over $36 billion worth of textiles from India, which accounts for approximately 30 per cent of India’s total exports.

India is currently negotiating a BTA with the US, aiming for implementation by late 2025. Experts believe that increased defence and energy imports from the US could be leveraged to secure a more favourable trade deal. However, pressure to lower agricultural import duties remains a contentious issue.

Analysts warn that the new reciprocal tariffs could dampen global and US GDP growth while fuelling inflation. The Indian commerce ministry reiterated that negotiations with US trade teams are underway.

“With India already facing 25 per cent tariffs on steel, aluminium, and auto exports, the new tariffs will introduce a baseline 10 per cent duty from April 5-8 before escalating to 27 per cent on April 9,” a government official explained.

According to international trade expert Abhijit Das, these duties clearly violate the World Trade Organisation (WTO) rules. He said it breaches both MFN (most favoured nation) obligations and the bound rate commitments, and a WTO member country has all the rights to go against these duties in the WTO’s dispute settlement mechanism.

Despite concerns, the commerce ministry maintains that the tariff revisions are a “mixed bag” rather than an outright setback. “India’s position remains comparatively favourable in labour-intensive sectors like textiles,” an official noted. The Trump administration has indicated that nations addressing US concerns could see tariff reductions in the future.

Goods already in transit will not be subject to the new duties, according to government sources.

From 2021-22 to 2023-24, the US was India’s largest trading partner. The US accounts for about 18 per cent of India’s total goods exports, 6.22 per cent in imports, and 10.73 per cent in bilateral trade.

With America, India had a trade surplus (the difference between imports and exports) of $35.32 billion in goods in 2023-24. This was $27.7 billion in 2022-23, $32.85 billion in 2021-22, $22.73 billion in 2020-21, and $17.26 billion in 2019-20.

In 2024, India’s main exports to the US included drug formulations and biologicals ($8.1 billion), telecom instruments ($6.5 billion), precious and semi-precious stones ($5.3 billion), petroleum products ($4.1 billion), gold and other precious metal jewellery ($3.2 billion), ready-made garments of cotton, including accessories ($2.8 billion), and products of iron and steel ($2.7 billion).

Imports included crude oil ($4.5 billion), petroleum products ($3.6 billion), coal, coke ($3.4 billion), cut and polished diamonds ($2.6 billion), electric machinery ($1.4 billion), aircraft, spacecraft and parts ($1.3 billion), and gold ($1.3 billion).

Trade analysts caution that China’s 54 per cent tariffs could lead to increased dumping of goods into India. The commerce ministry is closely monitoring developments and consulting stakeholders to assess the evolving situation.

Regarding agricultural exports, one source noted that the Indian diaspora in the US is unlikely to significantly alter consumption patterns despite rising prices. Rice exports, for example, will retain an edge over competitors from Vietnam and Thailand despite the 27 per cent tariff increase.

In 2024, India exported $2.58 billion worth of fish, meat, and processed seafood to the US. Other major exports included processed food, sugar, and cocoa ($1.03 billion), cereals, vegetables, fruits, and spices ($1.91 billion), dairy products ($181.49 million), edible oils ($199.75 million), and alcoholic beverages ($19.2 million).

As India navigates the new trade landscape, government officials and industry leaders continue to evaluate both challenges and opportunities presented by the sweeping US tariff changes. with agency inputs