US Tariffs
External risks persist due to threat of reciprocal tariffs by US, says Fin min
This story was originally published at 20:36 IST on 27 May 2025
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--Fin min: Outcome of pause in US-China reciprocal tariffs will be important
--Fin min: Pvt capex may lag amid global uncertainty, tight fincl conditions
--Fin min: External risks stay on 26% US tariff on India goods despite pause
--Fin min: Pvt investment remains cautious in face of global uncertainty
NEW DELHI – The Indian economy remain vulnerable to external risks on account of the reciprocal tariffs proposed by the US, even though Washington has announced a pasue of 90 days on the imposition of the duty, the finance ministry said Tuesday. The duty is likely to be effective Jul. 9 unless India strikes a trade deal with the US.
Washington's proposal of a 26% reciprocal tariff on Indian goods has injected uncertainty in the export outlook, the ministry said in its monthly economic review for April. "The risk of renewed trade barriers remains a key external vulnerability."
Amid such global uncertainty and tighter financial conditions, firms adopt a cautious stance, which could also lag private sector capital expenditure, the ministry said. "A successful US-India trade agreement could flip current headwinds into tailwinds, opening up new market access and energising exports," the ministry said. The deal could mitigate the risks and boost exports, even as private investment remains cautious in the face of global uncertainty, the ministry added.
India, which has been engaging with the US on a trade pact, aims to seal the first tranche of the deal before Washington levies the 26% reciprocal duty on Indian goods. The reciprocal tariffs could hurt India's export growth as the US is the top destination for the country's outbound shipments. Indian exports to the US were worth $80.77 billion in 2024, with a trade surplus of $36.35 billion, according to the data available with the commerce ministry.
Amidst global uncertainties, the outcome of the pause in the US-China reciprocal tariffs will also be important, the ministry said. After a brief period of tariff war-like situation, Washington and Beijing have reached an understanding, with the former committing to cut the extra duty on Chinese goods to 30% from 145%, and the latter agreeing to cut the duty to 10% from 125% for 90 days. "Developing countries, particularly those more integrated into global supply chains, will experience a significantly larger impact due to the changes in trade policies (among major countries)," the ministry said. End
US$1 = INR 85.33
Reported by Krity Ambey
Edited by Saji George Titus
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