Trump imposes tariffs on India at a 'discounted' rate of 26%

New Delhi: US President Donald Trump on Wednesday imposed "reciprocal tariffs" on a range of countries, with India facing a 26% tariff on its exports to the United States. 

The announcement, made on April 2, 2025, in the White House Rose Garden during a "Liberation Day" event, also includes tariffs of 34% on China, 20% on the European Union, and 24% on Japan.

The move, which fulfills a promise Trump made earlier in February 2025, has sparked concerns in India, the world’s fifth-largest economy, about its potential impact on key export sectors such as automobiles, pharmaceuticals, and agricultural products. 

According to a White House fact sheet, the US applies an average Most Favoured Nation (MFN) tariff of 5% on farm goods, while India’s tariffs on similar products can reach as high as 39%. 

The new reciprocal tariffs are designed to mirror the duties imposed by other nations on U.S. goods, a policy Trump has long criticised as unfair to American businesses.

India has been a focal point in Trump’s trade rhetoric since his election campaign. During a joint session of the U.S. Congress earlier this year, Trump singled out India for imposing tariffs exceeding 100% on American auto imports, citing the example of Harley-Davidson motorcycles struggling to penetrate the Indian market due to high duties. 

“India charges us tremendous tariffs, and it’s time we respond,” Trump had stated, a sentiment he reiterated during the tariff announcement.

The 26% tariff on India, while lower than the 52% duties India imposes on certain U.S. goods, has been described by some Indian analysts as a "discounted" rate, potentially reflecting ongoing diplomatic efforts. 

Union Commerce Minister Piyush Goyal, who visited the U.S. in March 2025 to negotiate with the United States Trade Representative (USTR), may have played a role in softening the blow. 

However, the Indian Council for Research on International Economic Relations (ICRIER) has highlighted the stark contrast in tariff structures between the two nations, warning that India’s food and farm exports could be among the hardest hit.

Economic implications for India

The imposition of these tariffs comes at a critical juncture for India, which has been deepening its trade ties with the US in recent years. 

In 2024, bilateral trade between the two nations reached $120 billion, with India exporting goods worth $78 billion to the US, including pharmaceuticals, textiles, and agricultural products. 

The new tariffs threaten to disrupt this balance, potentially increasing costs for Indian exporters and affecting their competitiveness in the U.S. market.

Trump’s reciprocal tariff policy aims to eliminate carve-outs that previously allowed developing nations like India to impose higher tariffs to protect domestic industries, such as agriculture. For India, this protection has been crucial to shield its millions of subsistence farmers from cheap imports of food grains produced by heavily subsidised farmers in the US and Europe. 

The new policy, which Trump has said will “make trade fair for America,” could force India to rethink its tariff strategy and negotiate new trade agreements to mitigate the impact.

The tariffs, effective immediately as of April 2, 2025, mark a pivotal moment in India-U.S. trade relations. While the two nations have strengthened ties in areas like defense and energy—India has increased its imports of US oil and gas in recent years—the trade front now faces uncertainty. Analysts suggest that India may respond by accelerating negotiations for a bilateral trade agreement with the U.S. or by diversifying its export markets to reduce reliance on the American market.

For now, Indian policymakers and businesses are bracing for the impact of the 26% tariff, which could raise costs for US consumers as well, particularly in sectors like pharmaceuticals where India is a major supplier of generic drugs.