buzzerblog - India's Response to US Reciprocal Tariffs: Strategies and Implications

Introduction

With the United States set to impose reciprocal tariffs on India from April 2, the Indian government and businesses are working on strategies to mitigate the potential economic impact. Reports suggest that India is considering tariff reductions on key imports while companies across multiple sectors are actively engaging with their US partners to ensure trade continuity.

Trade Negotiations and Government Efforts
Commerce and Industry Minister Piyush Goyal is currently in Washington, leading discussions on a potential Bilateral Trade Agreement (BTA). Both nations aim to finalize a trade deal by the end of the year, with a long-term target of reaching $500 billion in bilateral trade by 2030.

India has adopted a cooperative stance, focusing on proactive trade measures and diplomatic engagement instead of retaliation. According to financial analysts, this approach may encourage the US to favor nuanced agreements rather than broad tariff impositions, ultimately benefiting both economies.

Sector-Wise Impact and Measures

1. Electronics and Auto Components

   • The Indian government is considering reducing the 15-16% import duty on smartphones to zero for US imports. While India imports few smartphones from the US, this move aims to strengthen trade ties.

   • Electronics exports to the US were valued at $10 billion in FY24, with smartphones contributing 62% of the total share.

   • The US remains the largest destination for Indian auto components, accounting for $6.79 billion in exports, or 27% of shipments.

2. Pharmaceuticals

   • Indian pharmaceutical firms are advocating for the elimination of the 10% duty on US drug imports. This is significant as the US does not impose tariffs on Indian medicines.

3. Agriculture

   • India is considering lowering or removing import duties on US agricultural products such as walnuts, almonds, apples, and cranberries. Tariffs on these products currently range from 42% to 120%, and reducing them has been a longstanding demand from Washington.

4. Textiles and Apparel

   • Indian exporters are planning discussions with US buyers to ensure smooth trade flow. The government is also reviewing trade policies in this sector.

5. Gems and Jewellery

   • The Gem & Jewellery Export Promotion Council (GJEPC) is organizing a delegation to meet with key US stakeholders, including De Beers and Tiffany & Co. India currently supplies 12.99% of America's gem and jewellery imports.

Conclusion
As the deadline for US reciprocal tariffs approaches, India is actively working to minimize disruptions. The government’s strategy focuses on trade negotiations, tariff adjustments, and sector-specific measures to safeguard economic interests. Businesses are also aligning with international partners to navigate these changes effectively. With continuous dialogue and policy adjustments, India aims to maintain stable trade relations with the US while strengthening its global economic position.