India all set to enter into the reciprocal tariffs' rule on Wednesday
New Delhi hopes to have an amicable trade solution between India and the US as tariffs on agriculture products is learnt to have a key focus between the two countries
New Delhi: Amid the escalating trade war by US President Donald Trump, India is all set to enter into the reciprocal tariffs' rule on Wednesday (ie; April 2), and New Delhi hopes to have an amicable trade solution between India and the US as tariffs on agriculture products is learnt to have a key focus between the two countries. However, government sources revealed that India has already offered some tariff cuts on imports of the US farm products like almonds and cranberries as a further concession to the US. This development comes after Trump’s statement, saying that India is branded as a “tariff king” and a “big abuser” of trade ties.
A reciprocal tariff is a trade duty or tax imposed by one country on imports from another country, in response to similar tariffs or trade restrictions imposed by that other country on its exports. It is a ‘tit-for-tat’ approach to trade, aiming to balance trade imbalances and protect local businesses. However, Trump is reportedly set to launch so-called reciprocal tariffs on April 2 in 10-15 countries, including India, with the most significant trade imbalances.
The move of the US president is to aim at rebalancing global trade and boost US manufacturing, while collecting tariff payments to fund his domestic policy priorities, including an extension of tax cuts from his first administration and additional tax promises made during the 2024 campaign. However, it is reported that White House hasn’t yet outlined the structure, what tariffs are, how they’ll be calculated, or what the targeted countries need to do to secure coveted exemptions. The administration also hasn’t yet specified when these new tariffs will take effect.
It is also noted that tariffs are taxes charged on goods imported from other countries. For years, Washington has pushed for greater access to India's farm sector, seeing it as a major untapped market. But India has fiercely protected it, citing food security, livelihoods and interests of millions of small farmers in the country. However, the main challenge for India is to become a food-surplus powerhouse from a food-deficient nation. India's exports to the US span 30 sectors, with six in agriculture and 24 in industry, each facing different tariff impacts therein.
As the bilateral farm trade between India and the US is modest and stands at just about $8 billion (£6.2bn), the two countries work together on a trade deal, while sources said that Washington now wants to push “big-ticket” exports on farm produces such as wheat, cotton, corn and maize — to narrow its $45bn trade deficit with India. However, India mainly exports rice, shrimp, honey, vegetable extracts, castor oil and black pepper, while the US sends almonds, walnuts, pistachios, apples and lentils to India.
IMPACT ON INDIA
Trump sees tariffs as a way to safeguard the US economy from unfair international competition and a bargaining tool to secure better trade deals. However, the threat of a trade war is causing market instability and fueling worries about a potential recession in the US. However, the source also said India and the US aim to finalise the first phase of their trade agreement by September-October 2025 and have set a goal to more than double bilateral trade to $500 billion by 2030, up from the current $190 billion.
With Trump's move, both Indian industry and government officials have expressed concern over uncertainty whether Trump will proceed with his threat to impose reciprocal tariffs on its key trading partners, including India, on April 2. “The domestic industry is ‘paranoid’ and has been sending communications to the government, seeking protection against the impacts of these tariffs,” said a government source.
Nevertheless, all the stakeholders are hopeful that America may defer its decision to impose reciprocal tariffs from April 2, as India is one of the few countries with which the US has decided to negotiate a trade agreement. Last week, during the US team's visit to India, the commerce ministry informed that India and the US have agreed to initiate sectoral talks under the proposed bilateral trade agreement (BTA) in the coming weeks.
This decision followed four days of negotiations between senior officials in the commerce ministry from both the countries, which concluded on Saturday. “Sectoral expert-level engagements under the BTA will begin virtually in the coming weeks, setting the stage for an early in-person negotiating round. During these discussions, the two sides held a productive exchange of views on deepening bilateral cooperation in priority areas, including increasing market access, reducing tariff and non-tariff barriers and deepening supply chain integration in a mutually beneficial manner,” the ministry stated.
