Will India be hit by reciprocal tariffs?
Published: 03:03 PM,Mar 25,2025 | EDITED : 07:03 PM,Mar 25,2025
Reciprocal tariffs refer to the Trump administration's policy of imposing taxes on imported goods at the same rate that foreign countries impose on American goods. President Trump believes that the US is being treated unfairly in global trade, creating an imbalance in tariffs. Simply put, his stance is: if they charge us, we charge them.
The key question now is whether India will gain or suffer from this move. The State Bank of India (SBI), in a special report, suggests that India could benefit in an increasingly uncertain global trade environment. However, some economists warn that the Indian economy may face significant challenges. Let’s examine both perspectives.
THE POTENTIAL IMPACT ON INDIA
The US will impose reciprocal tariffs from April 2, making Indian exports more expensive and affecting key sectors like pharmaceuticals, textiles, IT services, automobiles, and chemicals. Higher tariffs could erode India’s price advantage in generic drugs, make textiles less competitive, and impact IT outsourcing.
Automobiles and chemicals which are already facing tight margins, may struggle further in global markets. This move will add to the challenges Indian exporters face amid intense global competition.
According to trade data, India exported $60 billion worth of goods to the US between April and December 2024 and maintained a trade surplus. However, the new tariff structure could reduce Indian exports by $7–$10 billion annually impacting GDP growth, employment, and currency stability. Economists estimate that India will be among the hardest-hit countries due to the significant difference — around 10 percentage points — between the average import duties of the two nations. In the short term, these tariffs may adversely affect India's economy fueling inflation.
AN ALTERNATIVE PERSPECTIVE
SBI’s report suggests that India may not be significantly impacted and could even benefit from the shifting trade landscape. The report highlights that long-term trends indicate a potential slowdown in US GDP growth, exports, and consumption.
Experts believe India has the resilience to navigate these challenges, thanks to its vast, young workforce, which can be leveraged for value-added manufacturing and services, enhancing global competitiveness.
The Reserve Bank of India’s Report on Currency and Finance (RCF), released in July 2024 projects that India will emerge as a global leader in skilled manpower supply over the next 10-15 years.
Therefore the skill upgradation of Indian youth is necessary for both domestic and global reasons. India has rich resources, which have to be channeled effectively to match the manufacturing standards of China.
Currently, manufacturing contributes about 13 per cent to India’s GDP - significantly lower than China’s however, efforts are underway to diversify exports and reduce specific market reliance.
This challenge also presents an opportunity to attract investments, enhance competitiveness, and decrease import dependency. To mitigate the impact of reciprocal tariffs, India can expand trade with Europe, Southeast Asia, and Africa, reducing dependence on the US.
A CROSSROADS FOR INDIA’S TRADE FUTURE
The impact of reciprocal tariffs on India is complex and depends on several factors. While Indian exporters face uncertainty, India also has an opportunity to strengthen its domestic industries, diversify export markets, and use diplomatic channels to mitigate potential risks. This move may also be considered a blessing in disguise.
Trump’s policies may create short-term pain - slower growth, job cuts, and a weaker rupee - but they also serve as a wake-up call for India to become more self-reliant and globally competitive. The coming years will determine whether India can turn this challenge into a strategic advantage.
The key question now is whether India will gain or suffer from this move. The State Bank of India (SBI), in a special report, suggests that India could benefit in an increasingly uncertain global trade environment. However, some economists warn that the Indian economy may face significant challenges. Let’s examine both perspectives.
THE POTENTIAL IMPACT ON INDIA
The US will impose reciprocal tariffs from April 2, making Indian exports more expensive and affecting key sectors like pharmaceuticals, textiles, IT services, automobiles, and chemicals. Higher tariffs could erode India’s price advantage in generic drugs, make textiles less competitive, and impact IT outsourcing.
Automobiles and chemicals which are already facing tight margins, may struggle further in global markets. This move will add to the challenges Indian exporters face amid intense global competition.
According to trade data, India exported $60 billion worth of goods to the US between April and December 2024 and maintained a trade surplus. However, the new tariff structure could reduce Indian exports by $7–$10 billion annually impacting GDP growth, employment, and currency stability. Economists estimate that India will be among the hardest-hit countries due to the significant difference — around 10 percentage points — between the average import duties of the two nations. In the short term, these tariffs may adversely affect India's economy fueling inflation.
AN ALTERNATIVE PERSPECTIVE
SBI’s report suggests that India may not be significantly impacted and could even benefit from the shifting trade landscape. The report highlights that long-term trends indicate a potential slowdown in US GDP growth, exports, and consumption.
Experts believe India has the resilience to navigate these challenges, thanks to its vast, young workforce, which can be leveraged for value-added manufacturing and services, enhancing global competitiveness.
The Reserve Bank of India’s Report on Currency and Finance (RCF), released in July 2024 projects that India will emerge as a global leader in skilled manpower supply over the next 10-15 years.
Therefore the skill upgradation of Indian youth is necessary for both domestic and global reasons. India has rich resources, which have to be channeled effectively to match the manufacturing standards of China.
Currently, manufacturing contributes about 13 per cent to India’s GDP - significantly lower than China’s however, efforts are underway to diversify exports and reduce specific market reliance.
This challenge also presents an opportunity to attract investments, enhance competitiveness, and decrease import dependency. To mitigate the impact of reciprocal tariffs, India can expand trade with Europe, Southeast Asia, and Africa, reducing dependence on the US.
A CROSSROADS FOR INDIA’S TRADE FUTURE
The impact of reciprocal tariffs on India is complex and depends on several factors. While Indian exporters face uncertainty, India also has an opportunity to strengthen its domestic industries, diversify export markets, and use diplomatic channels to mitigate potential risks. This move may also be considered a blessing in disguise.
Trump’s policies may create short-term pain - slower growth, job cuts, and a weaker rupee - but they also serve as a wake-up call for India to become more self-reliant and globally competitive. The coming years will determine whether India can turn this challenge into a strategic advantage.