US President Donald Trump’s reciprocal tariff plan for India is likely to be dealt with by the country in a calibrated way by leveraging the proposed India-US bilateral trade agreement (BTA), sources have said
“Whether Trump imposes reciprocal tariffs immediately on Indian exports or defers it, India will try to find its way out of it by negotiating a mutually beneficial BTA which the US would consider fair,” a source tracking the matter told businessline.
Calibrated response
In an internal meeting in the Commerce Department on Wednesday ahead of the reciprocal tariff announcement by Trump, it was decided that “knee-jerk reactions” would be avoided and the way forward would be mapped in a calibrated manner, the source said.
India already indicated a number of items, including some agricultural products, where it could prioritise tariff cuts for the US, when top officials from the two countries met last week to discuss the contours of the proposed BTA, the source added.
“This was done to indicate India’s seriousness in addressing concerns on the US’s bilateral trade deficit and address it in an expedited manner,” the source said.
Trump and Prime Minister Narendra Modi agreed to conclude the first tranche of the proposed BTA by the Fall of 2025 when they met in February this year.
Tariff uncertainty
The world is waiting in suspense for Trump’s ‘Liberation Day’ reciprocal tariff call, expected in the wee hours of Thursday in India (Wednesday evening in Washington DC), as the US has not shared much information about the form it will take and the countries that are to be covered beyond the “high-tariffing” ones.
On Monday, Trump said in a White House briefing that he had heard that India was willing to drop its tariff substantially. This strengthened expectations that he may defer reciprocal tariffs on India.
“Even if Trump imposes tariffs right away on most trade partners, including India, it may not end in a bad way for the country,” the source said. Some exports may indeed take a hit if tariffs are high, but if these are imposed on most countries, then it would result in a level playing field.
“India could negotiate carve-outs for itself as part of the BTA being negotiated and may even be better off than some other countries it competes with in the US market who do not get such carve-outs,” the source said.
Also, the imposition of reciprocal tariffs may lead to countermeasures from some other countries would disrupt world trade. “There could be opportunities for Indian exporters if there is a disruption in world trade, as it could step in to fill some gaps in supplies,” the source added.
Sectors in India that could be hit substantially if the US imposes reciprocal tariffs proportionate to tariffs charged by its trade partners include textiles, engineering goods, gems & jewellery, agricultural items, IT products such as phones and pharmaceuticals.
In FY24, India exported goods worth $77.51 billion to the US and its imports were worth $42.19 billion, leading to a trade imbalance of over $35 billion.