US President Donald Trump announced April 2, 2025 as the Liberation Day and imposed reciprocal tariffs on its major trading partners. Trump has applied the baseline tariff of 10% on imports coming from 180 countries to the US. India, which is one of the top trading partners of the US, will face a reciprocal tariff of 26%. So, let’s know the details about Trump’s reciprocal tariff on different countries and how it will impact the different sectors in India.
US Reciprocal Tariffs on Different Trading Partners
Here is the list of the tariff rates applied by the US on its different trading partners:
WHY SMC
- 20 Lac+ unique clients
- 33+ Years of Serving
- Advance Technical Analysis
- Free Demat Account
| Country | Tariff Charged by Other Countries (%) | US Reciprocal Tariff (%) |
|---|---|---|
| China | 67% | 34% |
| European Union | 39% | 20% |
| Vietnam | 90% | 46% |
| Japan | 46% | 24% |
| India | 52% | 26% |
| South Korea | 50% | 25% |
| Thailand | 72% | 36% |
| Switzerland | 61% | 31% |
| Indonesia | 64% | 32% |
| Malaysia | 47% | 24% |
| United Kingdom | 10% | 10% |
| South Africa | 60% | 30% |
| Brazil | 10% | 10% |
| Bangladesh | 74% | 37% |
| Singapore | 10% | 10% |
| Sri Lanka | 88% | 44% |
- The US announced reciprocal tariffs in response to duties and other non-tariff barriers put on US goods by other nations.
- It announced a minimum 10% tariff on goods imported to the United States and as high as 50% of the duties charged by other nations.
- The US has announced a 26% reciprocal tariff on India as against 52% levies imposed by India on US imports.
- China, European Union, and Japan would be charged with reciprocal tariffs of 34%, 20%, and 24% respectively, which is 50% of the tariff they charged on US imports.
- Canada and Mexico, the two largest U.S. trading partners, already face 25% tariffs on many goods and will not face additional levies due to the reciprocal tariff announcement.
- The 10% baseline tariff for all U.S. trading partners, to go into effect on April 5. For others, it will be effective from April 9. The 26% reciprocal tariff on India is 10% baseline tariff plus the remaining 16% tariff.
Impact of US 26% Reciprocal Tariff on India
The US has imposed a 26% (revised 27% on the White House order) reciprocal tariff on India on all imports coming to the US. While there is a broader discussion of how it is going to impact the different economies, India is slightly safeguarded as it has a trade surplus of $36.8 billion with the US in FY24.
India’s export basket to the US is majorly filled with engineering or electronics goods, gems and jewelry, pharmaceuticals, and petroleum products. So, there might be a sector-wise impact on India, which is as follows:
Automobiles
The US has decided to impose a 25% tariff on all imported automobiles and parts, which is likely to impact Indian automobile exporters such as Tata Motors. India’s maximum export basket to the US is the automobile parts and not the cars and bikes, and therefore the impact is expected to be largely muted.
Additionally, India could benefit from China’s higher tariffs as the US automakers could look for alternative options for importing auto parts at a lower cost. India exports around $2 billion worth of auto components to the US, and the potential shift from China could benefit Indian exporters in the long run.
Textiles
The textile industry could benefit from a competitive edge as India faces a lower reciprocal tariff of 26% as compared to Vietnam (46%), Bangladesh (37%), and China (34%). While there might be short-term disruptions, the textile sector contributes only 2% to India’s GDP, which means that the long-run impact could be minimal.
IT Services
India’s IT sector, which relies largely on the US client base will not directly face the heat of tariffs. However, the restrictive policies on outsourcing and visa approvals could impact Indian IT companies, which almost drew 50% of their revenue from America.
Also, there is a risk of a broader influence of reciprocal tariffs on the US economy with higher domestic prices. This might affect the US companies’ profits and their spending abilities, thereby directly impacting the value of outsourcing contracts to India.
WHY SMC
- 20 Lac+ unique clients
- 33+ Years of Serving
- Advance Technical Analysis
- Free Demat Account
Electronics Goods
Electronics is India’s largest exporting goods to the US, with exports worth $11.1 billion in FY24. The reciprocal tariff may negatively impact Indian mobile phone exporters due to the rising cost for American consumers. It might also derail Apple’s plan to shift production from China to India in the near future.
Over the long run, the Indian market could stabilise as Vietnam and China will face higher tariffs as compared to India. There could be a shift in the supply chain to India, which can also boost India’s electronics exports.
Gems and Jewellery
The US holds around a 30% share in India’s total gems and jewellery exports. The imposition of tariffs is likely to impact exports of key products such as cut and polished diamond and studded gold jewellery. The US importers will consider the higher cost while placing the order in India.
The Indian jewellery manufacturers or exporters might move to other countries with lower tariffs, such as Singapore or the UAE, which can impact the overall employment. This can also surge the gold prices, thereby dampening global demand and putting short-term price pressure.
Agriculture
The reciprocal tariff will likely hit India’s agriculture exports, including seafood, shrimps, and rice. However, the comparative advantage of tariff rates over China and Vietnam could minimize the impact. The seafood (shrimp), which has a marginal share in the US food expenditure, will not face the risk of lowering demand, and the exports to the US will remain stable.
Sectors Exempted from Trump Reciprocal Tariff
There are certain sectors or goods that are currently safeguarded from the brunt of the US reciprocal tariff.
- Pharmaceutical products
- Semiconductors
- Copper and Gold
- Some energy resources and specified minerals
India’s pharmaceutical sector is set to benefit greatly from this move as it currently imposes a 10% tariff on US pharma imports and is exempted from reverse tariff. India exports around $8.7 billion worth of pharmaceutical products to the US. America relies heavily on Indian pharmaceuticals and generic drugs, thereby India might face less pressure from US tariffs to keep the price under control.
Conclusion
US Liberation Day is considered a wave that can shake the different economies and global stock markets. India, which holds a major trading alliance with the US, is also expected to face the heat of reciprocal tariffs. Over the short run, there might be a reduction in demand from the US and supply chain adjustments.
Meanwhile, the higher reciprocal tariffs on China, Vietnam and Indonesia can also benefit India with a competitive advantage. Indian exporters will benefit from the lower comparative tariffs as compared to other Asian peers. Also, the bilateral trade agreements between the US and India will decide the fate of India’s exports moving ahead.
Despite the sector-wise adjustments, the Indian stock market will continue to remain one of the attractive opportunities due to solid domestic positioning. So, open free Demat account with SMC Global Securities and start investing today.
Frequently Asked Questions – FAQs
1. What are reciprocal tariffs?
A tariff is a duty applied to imported goods to protect the domestic economy or manufacturer by making the foreign goods more expensive. Reciprocal tariffs are imposed by a country in line with the tariffs imposed by another country. It is a retaliatory tariff to protect the domestic economy from cheaper goods coming in while facing a higher import duty on goods going out.
2. What is the trade relationship between India and the USA?
The trade relationship between India and the US has strengthened over the years with higher demand for Indian products. India’s trade surplus with the US has grown by 4 times from 2015 to 2024. The surge in exports to the US is mainly driven by electronics, pharmaceuticals, and textiles.
3. What are the reciprocal tariffs announced on India?
There is an existing tariff of 25% on steel, aluminum, and automobile parts on imports to the US. On liberation day, the US announced a 10% baseline tariff and a 27% tariff on India’s imports to the US. Few products, such as pharmaceuticals, semiconductors, and energy products, are currently exempted from reciprocal tariffs.
Author: All Content is verified by SMC Global Securities.
WHY SMC
- 20 Lac+ unique clients
- 33+ Years of Serving
- Advance Technical Analysis
- Free Demat Account
