Impact of Trump’s 26% Discounted Reciprocal Tariff on India

What Did Trump Say About India?
U.S. President Donald Trump has announced a global tariff policy called the Discounted Reciprocal Tariff, under which India will face a 26% tariff. While making the announcement, Trump stated, “This is a day of liberation that America has long awaited.” He also mentioned that Indian Prime Minister Narendra Modi, whom he considers a good friend, was informed that the U.S. has not been treated fairly in trade. Trump justified the tariff by pointing out that India imposes a 52% tariff on U.S. goods, so America will now charge half of that—26%—in return.

How Will This Tariff Affect India?

India is among the most affected nations by this tariff. Experts believe that certain Indian exports to the U.S. could face higher import duties, making them less competitive in the American market.

However, reports indicate that this tariff may not cause severe damage to India. The country’s overall exports may decline by 3-3.5%, but the growing production and service sectors could offset some of the negative impact. Additionally, India is diversifying its trade routes, strengthening ties with Europe and the Middle East to reduce dependence on the U.S.

Earlier this year, Indian Commerce and Industry Minister Piyush Goyal visited Washington to negotiate a Bilateral Trade Agreement (BTA) and seek exemptions from such duties, but the tariff has still been imposed.

Impact on the Textile and Jewelry Industries

Among the hardest-hit sectors will be textiles, apparel, and jewelry. The U.S. accounted for 28% of India’s $36 billion textile exports in 2023-24, amounting to nearly $10 billion. Over the years, India’s textile exports to the U.S. have increased, growing from a 21% share in 2016-17 to 29% in 2022-23.

The jewelry industry could also face setbacks due to higher costs imposed by the tariff.

India’s Trade Strategy Moving Forward

India’s evolving trade policies may use the Discounted Reciprocal Tariff model to counter countries that impose high duties on Indian exports. This could enhance the competitiveness of Indian products and support local industries. However, increased duties on imported goods could raise consumer prices, impacting buyers in India.

Overall, while the new tariff will create challenges for specific sectors, India’s efforts to diversify exports and negotiate trade agreements could help mitigate the long-term impact.