Donald Trump: US to Tax Indian Goods as India Taxes Ours
Agriculture, Pharmaceuticals and IT Sectors Face Potential Impact
December 18, 2024
Photo by Gage Skidmore, licensed under CC BY-SA 2.0, via Wikimedia Commons
U.S. President-elect Donald Trump has said his administration will impose equivalent tariffs on Indian goods in response to the duties that India levies on American products. This means whenever India taxes U.S. goods, the United States will mirror those charges to ensure what he described as a reciprocal arrangement.
Trump’s remarks came as he responded to questions from reporters in Florida, United States, on Dec. 16, about the prospect of a trade agreement with China and other nations. He cited India and Brazil as examples of countries that he said impose high tariffs on certain U.S. products.
“Reciprocal. If they tax us, we tax them the same amount. They tax us. We tax them. And they tax us. Almost in all cases, they’re taxing us, and we haven’t been taxing them,” Trump said, according to PTI. He added that the principle of matching tariffs would be applied whenever the United States finds that its goods face what he characterised as disproportionate duties overseas.
Trump stressed the need for fairness in U.S. trade relations.
India, which Trump repeatedly cited, currently imposes tariffs on certain U.S. products, and the president-elect’s comments indicated he intends to confront this arrangement. Trump did not provided specific details on which categories of goods would be targeted or the exact rates that might apply.
Trump also named China and Brazil, but his remarks singled out India as a prime example of a trading partner that he believes should face reciprocal measures.
If Trump were to implement the reciprocal tariffs, it could have several significant impacts, both in the U.S. and in India.
The immediate effect would be an increase in the cost of Indian goods sold in the U.S. Conversely, if India responds similarly by imposing increased tariffs on U.S. goods, American products would become more expensive in India. This could lead to reduced demand for goods from both countries, potentially lowering trade volumes and affecting industries that rely heavily on exports.
In contrast to Trump’s perspective, previous U.S. administrations believed that lower tariffs facilitated global trade, encouraged economic growth and supported the development of international markets, which in turn benefited U.S. exporters and consumers.
Maintaining strong diplomatic relationships was a key factor with Trump’s predecessors. Imposing tariffs could strain relations with important strategic partners. For instance, India is seen as a vital ally in South Asia, critical to balancing regional influences, especially with regard to China and Pakistan. Previous administrations often weighed these diplomatic considerations heavily against the direct economic impacts of tariffs.
Increased tariffs can lead to higher prices for consumers and businesses, contributing to inflation in both countries.
For businesses in both countries, the cost of imported raw materials might rise, leading to higher production costs and potentially reducing competitiveness in global markets. There could also be disruptions in supply chains, especially for industries that depend on goods that are traded between the two nations.
India exports a significant amount of pharmaceuticals and technology services to the U.S. The textiles and garments sector is also one of India’s largest in terms of exports to the U.S. Further, India exports various agricultural products like spices, rice and tea to the U.S., as well as jewellery, precious stones and leather products. Increased tariffs could make these products more expensive and less competitive in the U.S. market, leading to economic downturns, job losses and reduced economic growth.
Small and medium enterprises (SMEs) could be particularly vulnerable because they may not have the financial buffer to handle the increased costs of doing business.
