Aakhir Tak – In Shorts
- US President Donald Trump announced new 26% reciprocal tariffs on Indian imports.
- Trump called PM Narendra Modi a “great friend” but criticized India’s high import duties.
- The move will likely impact India’s agricultural and pharmaceutical exports to the US.
- The US is India’s largest trading partner, making US-India trade relations crucial.
- Donald Trump previously labeled India a “tariff king,” signaling ongoing trade friction.
Aakhir Tak – In Depth
Trump’s Tariff Announcement: A ‘Kind’ Measure?
US President Donald Trump unveiled new tariffs against India on Thursday. He described the measure as a 26% “discounted” and “kind” reciprocal tariff. Speaking from the White House, Trump highlighted India’s high import duties. He stated India imposes a 52% tariff on US imports. Trump termed this “very tough.” This action stems from perceived unfair trade practices by India. The introduction of these reciprocal tariffs marks a significant step in trade relations.
Friendship Amidst Trade Disputes
Donald Trump recalled his conversation with Prime Minister Narendra Modi regarding bilateral trade. This interaction happened during Modi’s US visit in February. Trump stated, “The Prime Minister just left. He’s a great friend of mine.” However, he added a critical note. “But I said, ‘You’re a friend of mine, but you’re not treating us right’.” Trump emphasized India’s 52% charge. He contrasted this with the US charging “almost nothing for years and years and decades.” This highlights the rationale behind the new reciprocal tariffs.
Potential Impact on Indian Exports
The newly imposed reciprocal tariffs are expected to hurt India’s exports. Key sectors like agricultural and pharmaceutical goods could face challenges. These sectors rely significantly on the US market. Furthermore, industries such as steel and aluminium are already feeling the pressure. Trump previously imposed 25% tariffs on these goods. Additionally, a 25% tariff on auto imports and parts will be collected from April 3. This adds to the concerns for Indian exporters.
The State of US-India Trade
US-India trade remains a vital economic link for both nations. From the fiscal year 2021-22 to 2023-24, the US stood as India’s largest trading partner. America accounts for roughly 18% of India’s total goods exports. An earlier report from SBI Research estimated a potential 3-3.5% decline in exports due to US tariffs. These new reciprocal tariffs could potentially worsen this predicted decline. The trade balance is a constant point of discussion.
Trump’s Previous Stance and Bilateral Talks
In fact, Donald Trump had announced his decision to impose reciprocal tariffs just hours before meeting PM Modi on February 13. During their joint press briefing, with PM Modi present, Trump noted India has been “very strong on tariffs.” This wasn’t the first time Trump criticized India’s trade policies. He previously called India a “tariff king.” He also labeled India a “big abuser” of trade ties. In an interview, the US President declared, “We will be charging them the same tariffs they charge us.”
Progress on Bilateral Trade Agreement
Despite India not receiving a tariff reprieve, which the government had hoped for, progress has been made elsewhere. New Delhi and Washington have advanced considerably on the Bilateral Trade Agreement (BTA). Just last week, both nations agreed on the terms of reference for the BTA. Sources indicated the Modi government was considering lowering import duties on specific American products. These included Harley-Davidson motorcycles, bourbon whisky, and Californian wine. Indeed, in this year’s Budget, the government proposed cutting import duties on Harley-Davidson bikes from 50% to 40%. This gesture, however, did not prevent the imposition of the new reciprocal tariffs.
Aakhir Tak – Key Takeaways to Remember
- Donald Trump imposed a 26% reciprocal tariff on India, calling it ‘discounted’.
- Trump referred to PM Narendra Modi as a friend but criticized India’s 52% import duties.
- The new tariffs will affect India’s agriculture, pharma, steel, aluminum, and auto sectors.
- US-India trade tensions rise as the US remains India’s largest trading partner.
- Trump levied tariffs despite India proposing lower import duties on items like Harley-Davidson bikes.
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