Govt Set Up Ministerial Panel to Study Impact of Reciprocal US Tariff

The government of India has constituted an inter-ministerial committee to study the impact of the proposed reciprocal tariff on Indian goods by the Donald Trump administration of the United States of America.

During Prime Minister Narendra Modi’s visit to the United States of America in February 2025, Donald Trump said that the United States government would impose reciprocal tariffs on the Indian goods exported to the United States of America.

During Prime Minister Modi's visit to America, both the countries agreed to negotiate a mutually beneficial trade deal. The negotiation on the first tranche of a multi-sector bilateral trade agreement is expected to begin in September -October of this year.

Both countries have also set a target to increase bilateral trade to $500 billion by 2030.

Committee and its Composition 

• The committee has been constituted within the Union Ministry of Commerce. 
• The inter-ministerial committee includes agriculture, industry, food processing, and electronic and information technology ministries.

Function of the Committee 

The committee will give its recommendation on various issues related to the India-United States trade relations, including:

• Identifying the sectors of the Indian economy which is likely to be adversely affected if the American government increases tariffs on India products 
• Suggest measures to counter and limit the impact of the possible American increase in tariffs on Indian goods exported to the United States of America.
• Suggest a negotiation strategy to be adopted for the forthcoming trade talks with the US 

What is a Reciprocal Tariff?

Reciprocal tariffs in international trade refer to the customs duties imposed by a country on the import of foreign goods, which are similar to duties imposed by the foreign government on its products.

It means that if India has imposed a customs duty of 6% on American cars imported to India and the Americans have imposed 2 % on the Indian cars exported to the United States of America, then the Americans will increase the customs duties on Indian cars to 6% to make it equal.

This will make the Indian car costly to the Americans, and they may stop buying Indian cars.

This will adversely affect Indian exports to the United States.

Impact of Reciprocal Tariffs on India 

• In agriculture, food processing, textiles, and pharmaceuticals, Indian tariffs are higher than those of the United States.
• According to Goldman Sachs, if the United States imposes reciprocal tariffs on Indian exports, then the Indian gross domestic product (GDP) growth can decline by 0.1-0.3 percentage points.
• The Citi Research analysts have estimated a loss of around $7 billion in Indian exports.

India’s Trade Surplus with the US

America is India's largest trading partner, and India has a trade surplus.

The total trade between the two countries in 2023-24 was  $119.71  billion. 

India's exports to the United States were $77.51 billion, imports $42.19 billion, and trade surplus was $35.31 billion.

The United States is the second largest trading country in the world after China.

The United States has a huge trade deficit with almost all the countries.

Donald Trump wants to reduce the trade deficit and has created an America First Trade Policy Memorandum to reduce its trade deficit. 

Donald Trump has imposed a 25% Tariff on Canadian and Mexican goods, which will be implemented from 4 March 2025.

He has threatened a 10 % tariff on Chinese imports.

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