Any potential reciprocal tariff by US administration is likely to hurt nearly every large sector in India, with chemicals, automobile, textiles and footwear poised to be among the worst-hit, a note by Emkay Global has said.
Chief Economist Madhavi Arora, however, added that President Trump has so far only announced a review, with April being the earliest for the tariffs to come into effect, which may imply that there is a window for nations to negotiate the issue.
The note added that PM Modi may be able to ‘wrangle’ some exceptions or favourable deals, but that may likely involve lowering import duties, and buying from America. Defence and energy sectors are likely to see more US imports, as evident in the joint briefing of President Trump and PM Modi, where US oil and gas as well as defence platforms featured among items that US was very keen to extend to India.
India imposes among the highest tariffs on US imports, compared to other nations, which may mean it is set to be ‘disproportionately hurt’, if reciprocal tariffs kick in, the note added.
Trump told reporters about his plan to impose reciprocal tariffs hours before his meeting with PM Modi in Washington D.C. last week. “I will charge a reciprocal tariff. Any country that charges the US a tariff will receive tariffs of the same amount. No more or less. In other words, if they charge us tax or tariffs, we will charge them the exact same tax or tariffs. Very simple,” Trump said.
“This is true across most broad product categories – especially for intermediate goods, which could hurt the govt’s current strategy of incentivizing domestic manufacturing/ assembly.” said the Emkay note.
Economists at Morgan Stanley as well as Nomura too have identified India and Thailand as among the nations most exposed to risks from President Trump’s reciprocal tariffs. “Emerging Asian economies have higher relative tariff rates on US exports and are thus at risk of higher reciprocal tariffs,” Nomura analysts led by Sonal Varma said in a note to clients. “We expect Asian economies to step up their negotiations with Trump.”
Deutsche Bank too had reported that India’s wide tariff differential with the US is at particular risk of being impacted.
The Emkay note underscored that a very low share of Indian imports from the US have ‘high’ tariffs. Around 82% of FY24 US import carrying a tariff of 0-10%, and around 15% of imports have tariffs of 10-20%. Only about 3% of India’s imports from America have tariffs that are higher than 20%. The Emkay note, however, adds that on a relative basis, India imposes one of the highest tariffs on US goods, implying it could be ‘disproportionately hurt’ if the proposed reciprocal tariffs are actually rolled out.
India is the 10th largest country to export to US, at $91 billion in CY24, much below Mexico, China and Canada, which form the the top three countries. For 2024 calendar year, US’ trade deficit with India was $49 billion – substantially lower than that of the top three major exporters to US. It is widely expected that Trump’s tariff regime is aiming to target these countries that have been running very heavy trade deficits with the US.
