'India charges a lot': Donald Trump threatens 'reciprocal' tariffs

The United States President-elect Donald Trump’s latest criticism of India’s tariffs and his warning of reciprocal measures are setting the stage for heightened pressure on policymakers in New Delhi.

 

Trump’s remarks on India, made just weeks after he pledged to increase tariffs on imports from Mexico, Canada, and China, underscore his incoming administration’s focus on what he calls “reciprocity” in trade. Commerce secretary pick Howard Lutnick echoed this stance, emphasising that “reciprocity” will be the key theme of the Trump administration’s trade policy.

 

“Reciprocal. If they tax us, we tax them the same amount,” Trump told reporters at his luxury resort Mar-a-Lago in Palm Beach. “Almost in all cases, they’re taxing us, and we haven’t been taxing them…”

 

The US president-elect further said: “The word reciprocal is important because if somebody charges us — India, we don’t have to talk about our own — if India charges us 100 per cent, do we charge them nothing for the same?”

 

Citing an example of this purported imbalance, he further said: “You know, they send in a bicycle and we send them a bicycle. They charge us 100 and 200. India charges a lot. Brazil charges a lot. If they want to charge us, that’s fine, but we’re going to charge them the same thing.” 

 

Indian government departments, including the finance ministry, have already begun “brainstorming” sessions to assess Trump’s potential policies and prepare for the challenges expected after he assumes office on January 20. Experts believe that reciprocal tariffs are a likely outcome, and India must develop a robust strategy to address the situation.

 

“Trump has been vocal about the fact that countries, such as India and China, don’t import enough from the US. There could be pressure to allow market access for agricultural products (which is a sensitive area for India). India needs to work out a coherent strategy while ensuring that it does not lose its bargaining power,” said Biswajit Dhar, a distinguished professor at the Council for Social Development. He also noted that US tariffs on some Indian export items are already high.

 

Trump’s criticism of India’s high tariffs on Harley-Davidson motorcycles during his previous tenure as president remains a notable point. Ajay Sahai, director general and CEO of the Federation of Indian Export Organisations (FIEO), said Trump’s statements suggest that the US is seeking reductions in Customs duties on certain Indian products.

 

“As a strategy, we should look into products where the US’ major interest lies and explore the possibility of making concessions, if necessary,” Sahai said. “For instance, he (Trump) had mentioned Harley Davidson motorcycles in the past. There is no domestic competitor of the products and the market is limited. If that is the issue, can we take a revenue cut by reducing import taxes? The government needs to take a call on this.”

 

Trade between India and the US remains strong and growing. During the financial year 2023-24, bilateral merchandise trade reached nearly $120 billion. The US is India’s largest trade partner and export destination, with a trade surplus of $35.3 billion in the latter’s favour. However, Trump in his previous term as president (January 20, 2017-January 20, 2021) had expressed dissatisfaction with this surplus, arguing that India wasn’t importing enough from the US.

 

The overall bilateral trade in goods and services stood at $190.1 billion for calendar year 2023. On the investment front, the US ranked as the third-largest source of foreign direct investment (FDI) into India in FY24, with inflows of $4.99 billion, accounting for nearly 9 per cent of total FDI equity inflows.