The United States, under President Donald Trump, initiated a policy of “reciprocal tariffs” on April 2, 2025, aimed at rebalancing global trade and protecting American manufacturing. These tariffs, varying from 10% to 54%, are designed to match the duties other countries impose on US goods, with Trump declaring this move as “Liberation Day in America” to end decades of perceived economic exploitation.
Trump’s strategy involves a baseline 10% tariff on all imports from April 5, 2025, escalating to country-specific reciprocal rates by April 9. India, for example, faces a 26% tariff due to its higher duties on certain US products. While some nations with large trade surpluses face steep tariffs, Mexico and Canada are exempted. The UNCTAD has expressed concern that these tariffs could weaken global investment and trade, harming vulnerable economies.
The announcement of these tariffs triggered retaliatory actions from several countries. China, in particular, responded by raising tariffs on US goods and imposing export curbs on rare earth elements. Although Trump announced a 90-day pause on higher tariffs for most nations on April 9, tariffs on China increased to 125%. The European Union also prepared countermeasures but paused to pursue negotiations, while other nations like Canada, Mexico, Japan, and South Korea opted for dialogue over immediate retaliation.
India, with a significant trade surplus with the US, faces both challenges and opportunities. While sectors like electronics, gems, and jewelry are expected to be negatively impacted, pharmaceuticals and IT services remain largely unaffected. The Indian government is actively engaged in trade negotiations with the US, seeking a Bilateral Trade Agreement to mitigate the tariffs’ impact and strengthen economic ties.
India aims to leverage its strong domestic economy and initiatives like “Make in India” to offset potential losses and become a more attractive manufacturing hub. The tariffs could reshape global supply chains, with India positioned to capture competitive gains in certain sectors. However, challenges such as logistics costs and policy instability need to be addressed to fully capitalize on these opportunities.