Weeks after threatening to raise tariffs on America’s top three trade partners—Mexico, China, and Canada—US President-elect Donald Trump on Tuesday turned his attention to India, criticising its high tariffs and warning that Washington would impose reciprocal taxes on Indian products.
This marks the first time Trump has threatened tariffs on Indian goods since winning the election in November. However, during his campaign, Trump frequently referred to India as a “very big [trade] abuser.” Trump is set to assume control of White House on January 20.
Speaking to reporters at Mar-a-Lago, Trump criticised India’s tariff regime, pointing to 100 per cent tariffs on certain US products. “The word ‘reciprocal’ is important because if somebody charges us—India, for example—we don’t have to talk about our own. If India charges us 100 per cent, do we charge them nothing for the same? They send in a bicycle, we send them a bicycle, and they charge us 100 or 200 per cent,” Trump said.
When asked about a potential trade agreement with China, Trump redirected the conversation to India and Brazil, both of which he accused of imposing high tariffs. “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,” Trump said at the briefing.
He further claimed that US products are heavily taxed by other nations, while American administrations have failed to respond in kind. “Reciprocal. If they tax us, we tax them the same amount. They tax us. We tax them. And they tax us,” he added.
The US remains India’s largest trade partner, with bilateral trade reaching nearly $120 billion in FY24, slightly surpassing India’s trade with China. Unlike China, though, India enjoys a favourable trade relationship with the US, making it a critical source of foreign exchange.
Trump’s statement assumes significance as Department for Promotion of Industry and Internal Trade (DPIIT) Secretary Amardeep Singh Bhatia had last week said that there have been consistent efforts to integrate India with the global supply chain and reduce tariffs to the global average, but pressure to raise tariffs from the industry keeps emerging and so it needs to be looked at why Indian industry is not competitive enough.
Bhatia’s comment comes at a time when large steel producers are pressing the government to significantly raise tariffs on steel. The Steel Ministry has asked the Commerce and Industry Ministry to raise tariffs on steel imports by as much as 25 per cent, citing a sharp surge in steel imports from countries with which India has signed free trade agreements (FTAs).
Trade experts believe US tariffs on other nations, particularly China, could benefit India, as previous trade wars during Trump’s first term created new export opportunities for several countries, with Mexico emerging as the biggest winner. But tariffs on India would impact the country’s already slackening exports.
Think tank Global Trade Research Institute (GTRI) reported that India was the sixth-largest beneficiary of the US-China trade war, with a $36.8 billion increase in exports driven by growth in electronics, pharmaceuticals, and engineering goods.
Mexico’s exports to the US increased by $164.3 billion between 2017 and 2023, followed by Canada with $124.0 billion, and Vietnam in third with $70.5 billion. South Korea ($46.3 billion) and Germany ($43.0 billion) rounded out the top five.
The fresh threats are particularly concerning as India lost duty-free access under the decades-old Generalised System of Preferences (GSP) programme in 2019, during Trump’s first presidency. India, previously the largest beneficiary, saw tariff-free benefits on approximately $5.7 billion worth of exports to the US.
Despite efforts to diversify exports, India’s dependence on the US has grown significantly over the past decade. According to official 2022–23 data, the US accounted for 18% of India’s exports, up from 10 per cent in 2010–11. India’s export basket to the US is well-diversified, spanning industries such as textiles, electronics, and engineering.
Nevertheless, Trump’s proposed tariffs are expected to primarily target China due to the far larger trade imbalance. A new round of US-China trade wars could present opportunities for India, as investments and manufacturing shift away from China.