India To Be Hit Hard By Trump's Reciprocal Tariffs. Here's Why

President Donald Trump's recent announcement of reciprocal tariffs on all US trading partners has sparked widespread concern and uncertainty globally. This move, made ahead of his meeting with Prime Minister Narendra Modi, aims to address the long-standing imbalance in trade relationships where other countries impose high tariffs on US goods while the US maintains a relatively open economy.

According to Cousin's analysis, India charges US imports more than 10 percentage points higher than US levies on Indian goods.

Mr Trump said, "They can build a factory here, a plant, or whatever it may be, and that includes the medical, that includes cars, that includes chips and semiconductors, that includes everything."

"If you build here, you have no tariffs whatsoever. And I think that's what's going to happen. I think our country is going to be flooded with jobs," he added.

Mr Trump's decision is particularly significant for India, which is one of the countries most affected by the reciprocal tariffs. India's high tariff rates, which average 9.5% on US exports compared to the US's 3% tariff rate on Indian goods, make it vulnerable to retaliatory tariffs. According to Nomura analysts, India's weighted average effective tariff on US exports is significantly higher than the US's tariff rate on Indian exports.

Ahead of his meeting with Mr Modi, Mr Trump also said that India is a "hard place to do business" because of the high tariffs. "But again, whatever they charge us, we're charging them. So, it works out very well. It's a beautiful, simple system, and we don't have to worry about charging too much or too little," he said.

The impact of these tariffs is expected to be far-reaching, with India's food products, vegetables, textiles, and clothing sectors likely to be hit the hardest. Electrical machinery, gems and jewelry, pharma products, autos, iron and steel are also among the key commodities that India exports to the US, which could be affected by the tariffs.

In response to these developments, India is considering reducing tariffs on over 30 products and increasing its imports of US defense and energy goods to ease trade tensions. However, India's trade relationship with the US is complex, and the tariffs are likely to have far-reaching consequences for businesses and consumers on both sides.

As Mr Trump pushes ahead with his reciprocal tariff plans, India, Japan, and the European Union are expected to be among the hardest hit. With the tariffs potentially taking effect from April this year, India is bracing itself for the impact on its economy and trade relationships.

The reciprocal tariffs are also likely to have broader implications for global trade. The move is seen as a significant shift in US trade policy, which could have far-reaching consequences for trade relationships around the world.

In the short term, the tariffs are likely to lead to higher prices for consumers and reduced competitiveness for businesses. However, in the long term, the move could lead to a more balanced trade relationship between the US and its trading partners.