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Informist, Tuesday, Feb. 11, 2025

 

NEW DELHI – US President Donald Trump's warning of reciprocal tariffs Monday threatens India the most among emerging Asian nations, with Nomura economists suggesting that tariffs on India's exports to the US could triple from current levels.

 

According to Nomura, India levies a 9.5% weighted average effective tariff on US exports, while the US has a 3% tariff rate on India's exports. The corresponding numbers for Thailand are 6.2% and 0.9%, respectively, and 7.1% and 2.9% for China. "On the other hand, countries that have free trade agreements with the US, such as Singapore and South Korea, are safer with respect to Trump's reciprocal tariff threat," Nomura said in a note.

 

On Monday, Trump announced a flat 25% tariff on all steel and aluminium imports, adding that a decision would be made later this week on reciprocal tariffs without specifically naming any countries. "If they charge us, we charge them," Trump said, according to the BBC.

 

The US has been India's second-largest trade partner in the first seven months of 2024-25 (Apr-Mar), with total trade between the two countries standing at $82.53 billion in Apr-Nov. However, US was the largest importer of Indian goods, with $52.89 billion of exports making up 18.6% of all outbound shipments. India has a trade surplus of $23.26 billion with the US in Apr-Nov.

 

"So far, India has been trying to avoid confrontation. In the recently announced budget, it reduced import duties on products across electronics and textiles sectors, and also high-end motorcycles," Nomura analysts said. "Ultimately, India is exploring options to strike a deal with the US to avoid higher reciprocal tariffs in the near term. Over the medium term, it is looking to engage with the US and attract more supply chains into the country."

 

According to Hui Ting Sim of Moody's Ratings, Indian steel producers will face "increased challenges" when it comes to their exports because of the higher US tariffs. "Over the past 12 months, high steel imports into India have already dampened prices and earnings of steel producers in India," the analyst warned.

 

The latest salvo in the returning US president's trade war comes just ahead of Prime Minister Narendra Modi's visit to Washington. Modi will meet Trump during his two-day visit of the US Wednesday and Thursday.

 

"Trade and investment are going to be priority issues in the discussion... Energy and defence are going to be on the table when the two leaders meet," Foreign Secretary Vikram Misri told reporters last week. Asked if the issue of tariffs will also come up during the discussions, Misri said there will be intense discussions on the same.  End

 

US$1 = INR 86.77

 

Reported by Siddharth Upasani

Edited by Tanima Banerjee

 

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