India is expected not to levy counter-tariffs on the US and will prioritize finalizing the bilateral trade agreement swiftly after the Donald Trump administration imposed a 26% tax on exports from India, a government official informed Reuters. Trump’s action has unsettled international markets and Dalal Street, causing the Sensex to drop by 1.6% since Wednesday.
The official stated that the government is relying on a crucial provision in the executive order signed by Trump last week, which provides relief to countries that make “significant strides to address non-reciprocal trade agreements.”
Another government representative noted that India found reassurance in being among the initial countries to begin discussions on a trade agreement with the US. Asian counterparts such as China (34%), Vietnam (46%), and Indonesia (32%) have faced increased tariffs.
While China announced that it would implement reciprocal 34% tariffs on all US imports starting April 10, Indonesia stated that it would not respond in kind. Vietnam, a rising option for manufacturing and exports instead of China, has consented to reduce its tariffs to zero in a possible trade agreement.
Last week, Trump declared a 26% reciprocal tariff on India, despite referring to Prime Minister Narendra Modi as a “great friend.”
The positive aspect for India is that semiconductors, copper, and pharmaceuticals are not subject to the US tariffs. India provides almost 50% of all generic drugs in the United States. Nevertheless, exports in crucial areas such as electronics, auto components, and gemstones may be adversely affected.
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Although India has approached its response to the tariffs carefully, the opposition has criticized the government for not securing a reprieve despite the “camaraderie” between PM Modi and Trump.
Leader of the Opposition in the Lok Sabha, Rahul Gandhi, stated that the tariffs would “utterly destroy” the economy.
The suggested Bilateral Trade Agreement (BTA) with the US has made significant advancements. The two countries reached an agreement on the terms of reference for the BTA last month.
India has attempted to win Trump’s favor by reducing import taxes on Harley-Davidson motorcycles from 50% to 40%, as well as on bourbon whiskey. It has also removed a tax on digital services, informally referred to as the ‘Google Tax’, that impacted American tech behemoths.
