US President Donald Trump on Tuesday doubled down on his plan to impose reciprocal tariffs against trading partners, including India, launching a global trade war. In his speech to the Congressional lawmakers, Trump said "Tariffs that match other countries, dollar for dollar, are set for April 2."
"Other countries have used tariffs against us for decades, and now it’s our turn to start using them against those other countries,” Trump said. "India charges us tariffs higher than 100%, China’s average tariff on our products is twice what we charge them and South Korea’s average tariff is four times higher," Trump said.
This comes as Trump made good on his word to launch new 25% tariffs on goods from US neighbours Canada and Mexico on Monday, and doubled tariffs on Chinese products to 20%. He had vowed to address what he called unfair trade practices from foreign countries during his campaign trail.
"This is happening by friend and foe," he said. "Whatever they tax us, we will tax them," Trump explained. "The US has historically charged lower tariffs than those levied by many of its trading partners. We will take in trillions and trillions of dollars and create jobs like we have never seen before," he said. "We've been ripped off for decades by every country on Earth, and we will not let that happen any longer."
While India’s average tariff rate is around 17%, one of the highest among the US's trading partners. If reciprocal tariffs come into place, this will mean Indian exporters will have to pay more for goods like pharmaceuticals, textiles, and information technology, which could hurt the Indian economy.
There will also be added pressure on India to lower its trade barriers and changes in economic policy. India, being a major trading partner of the US, enjoys a trade surplus with the country. India has already taken steps to appease tensions, such as cutting tariffs on Harley-Davidson motorcycles, US almonds, apples, chickpeas, lentils, and walnuts.
The reciprocal tariffs could also mean that India losing access to the US market.
To offset this, India, which usually takes a cautious approach, could opt for negotiations and compromise: India and the US could embark on trade talks to lower tariffs on both sides or explore alternative markets to reduce reliance on US trade, like the EU countries.