The return of the Trump-era after the US election has unnerved global market in as much as market is continuously trying to assess the future course of actions. Experts argue that behind such ‘tariff terrorism’ the fundamental objectives of Trump are- asset monetisation, lower crude prices, lower rates, weaker dollar, return of manufacturing to US are his core interests.
Despite the hint by the US Treasury Secretary Howard Lutnick at a partial rollback of tariffs against Canada and Mexico, the global market including India remain jittery due to the uncertain future action by the US President Donald Trump. On the other hand, the Chinese authority’s announcement regarding stimulus measures and decision to restructure its steel industry and reducing output is likely to boost metal industry and steel output in India.
A trade war with the US is adding downside risks to growth, while Europe’s major economies are making historic shifts in fiscal policy, particularly in Germany, where new spending initiatives could support economic expansion.
In 2018, the US imposed a 25% tariff on Indian steel and a 10% tariff on aluminium under Section 232 of the Trade Expansion Act of 1962. In response, India proposed tariff hikes on around 28 or more US products, but implementation was delayed due to ongoing negotiations. In 2019, following the US decision to revoke India’s Generalized System of Preference (GSP) status in June, India imposed retaliatory tariffs on several US products (around 28 or more), raising duties by 1.7% to 20%.
According to the United States Trade Representative (USTR) 2023 National Trade Estimate (NTE) Report, India’s tariff structure impacted US agricultural products, electronics, medical devices, and energy products. The table below provides an overview of major US product categories and their corresponding tariff rates:
| Product Category | Tariff Rate (%) | Key Impacted US Exports |
| Agriculture (avg.) | 39.2% | Almonds, walnuts, apples, lentils |
| Vegetable Oils | Up to 45% | Soybean oil, sunflower oil |
| Apples, Corn, Motorcycles | 50% | US apples, Harley-Davidson |
| Automobiles & Flowers | 60% | Luxury cars, floral products |
| Natural Rubber | 70% | US rubber manufacturers |
| Coffee, Raisins, Walnuts | 100% | US dried fruit industry |
| Alcoholic Beverages | 150% | Bourbon, wine, beer |
| Certain Drug Formulations | Above 20% | US pharmaceutical firms |
Source: USTR 2023 National Trade Estimate (NTE) Report.
During Trump’s first term, his protectionist policies, including tariffs and tax cuts, did not achieve their intended goals of reducing the trade deficit, boosting domestic manufacturing, or creating sustainable jobs. Despite imposing multiple tariffs, the U.S. trade deficit increased from $479 billion in 2017 to $643 billion in 2021 (Trump’s first term).
US President-Elect Trump, the Swearing-in-ceremony in 20th Jan’25, is briefed in ’Foreign Policy’ as ‘Nationalist’ and ‘America First.’ Earlier in 2018, he launched a trade war with China by sharply increasing tariffs on various categories (worth $50 billion) of Chinese goods imported into the U.S.
The ongoing era is shrouded with certain uncertainty after the US President Donald Trump is once again after his previous regime is in full mood to impose tariffs on several countries including Canada, Mexico, India among others. India, after enjoying strong fundamentals, in recent times are experiencing certain doldrums due to such adverse global developments. For instance, the Indian rupee has shown a continuous decline due to strong US dollar index despite RBI’s continuous intervention measures, coupled with liquidity challenges.
In this background, negotiations on the bilateral trade agreement (BTA) have assumed significance as the government is fast-tracking work on a list of items such as cars, motorbikes and electronics, where tariff cuts can be offered to appease the US, with special focus on cars and agriproducts.
According to the India-US Joint statement (13 Feb’25), the U.S. and India will take an integrated approach to strengthen and deepen bilateral trade across the goods and services sector, and will work towards increasing market access, reducing tariff and non-tariff barriers, and deepening supply chain integration.
India also expressed appreciation for U.S. measures taken to enhance exports of Indian mangoes and pomegranates to the United States. Both sides also pledged to collaborate to enhance bilateral trade by increasing U.S. exports of industrial goods to India and Indian exports of labour-intensive manufactured products to the United States.
According to the latest development, the Union government informed a parliamentary panel that New Delhi had not made any commitment to the US on reducing tariffs and conveyed to the panel that negotiations were still on, and that India had sought time until Sept’25, while clarifying that the Trump administration had not set a deadline of April 2 for New Delhi. At the meeting of the parliamentary standing committee on external affairs held, Commerce Secretary has informed the panel members that India could reduce tariffs on some of the items, such as nuts, but would protect its dairy industry.
The U.S. tariffs present both challenges and opportunities for India. While some sectors may struggle, India’s strong domestic demand, export diversification strategies, and diplomatic negotiations could help mitigate the impact. By adopting a non-retaliatory approach and engaging in bilateral trade discussions, India seeks to protect its economic interests while strengthening long-term trade relations with the U.S. The success of PM Modi’s diplomatic efforts and India’s strategic tariff adjustments will be crucial in shaping the future trajectory of India-U.S. trade relations, whereas a real “MEGA”(MAGA+MIGA) would be a win-win game leading to a pareto optimal solution.
