Donald Trump’s Reciprocal Tariffs Potential Advantages for India

The new tariffs imposed by the United States under President Donald Trump’s reciprocal tariff policy could bring a surprising advantage to India, despite the initial concerns. The tariffs, which will come into effect in two phases, will see a base 10 percent duty imposed on all countries starting April 5, followed by a higher reciprocal tariff for countries with the largest trade deficits from April 9. In India’s case, after the base 10 percent tariff, an additional 16 percent tariff will be levied, bringing the total duty to 26 percent. As the tariff situation unfolds, India could benefit from its relatively lower tariff rate compared to other countries. While countries with traditionally lower tariff regimes, such as the EU, Japan, Australia, or China, may retaliate, India is in a better position to negotiate these tariffs down through its ongoing trade talks with the US.

Also Read : Supreme Court Sacks 25,000 Teachers, Blow to Mamata Govt

India’s Tariff Advantage Lower Rates Compared to Key Competitors

However, India’s tariff rate is significantly lower compared to its competitors. Countries like China (34 percent), Vietnam (46 percent), Bangladesh (37 percent), and Thailand (36 percent) face much higher tariffs, especially in sectors where they compete directly with India, such as textiles and garments. In fact, India’s 26 percent tariff is also lower than that of other Asian competitors, including Thailand (36 percent) and Indonesia (32 percent). While India’s tariff is higher than some developed nations, such as Japan (24 percent), South Korea (25 percent), Malaysia (24 percent), the EU (20 percent), and the UK (10 percent), these countries generally do not compete with India in the same product categories.

Potential Comparative Advantage for India in Textiles and Other Sectors

The 16 percent effective tariff on India could potentially give the country a comparative advantage in certain sectors like textiles, especially over competitors such as Vietnam, Bangladesh, and China. This advantage mirrors the preferential access Bangladesh once enjoyed in the European Union, where it had zero-duty access due to its Least Developed Country (LDC) status, while India had to pay duties.

Opportunity for India to Negotiate Lower Tariffs Through Bilateral Trade Agreement

Another positive for India is the Trump administration’s indication that these reciprocal tariffs could be revised or reversed if countries address American trade concerns. India is already negotiating a bilateral trade agreement with the US, aiming to finalize the first phase by October this year. The discussions will likely focus on mitigating the adverse effects of these tariffs, providing further room for India to negotiate for lower rates.