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Global trade has entered an era of disruption, driven by the United States recalibration of its tariff policies. From invoking reciprocal duties to challenging long-standing multilateral trade principles, the US is reshaping international trade flows — with deep implications for economies like India. Notable developments in US’s reciprocal tariffs policy include the US-China 'Phase One' deal, judicial reversals of Trump-era tariffs, and the temporary reinstatement of duties under executive orders. For Indian exporters, these shifts present both compliance challenges and strategic openings. Sectors such as pharmaceuticals, textiles, electronics, and steel must navigate a complex trade terrain marked by legal uncertainty and heightened scrutiny. This compendium offers clarity amid this volatility, equipping businesses with insights, context, and actionable strategies to mitigate risk, remain compliant, and leverage global trade realignments to their advantage.
India stands at a strategic inflection point as the US escalates its use of reciprocal tariffs. While global trade has traditionally adhered to the Most Favoured Nation (MFN) principles under the WTO, the unilateral tariff actions by the US mark a fundamental departure, with India in the crosshairs due to its historically higher tariff regime. India’s average tariff stands at around 17%, significantly higher than the US's 3.3%. This disparity, particularly in sectors like agriculture and automobiles, has been a persistent source of friction in bilateral trade dialogues.
In December 2024, President Trump renewed criticism of India’s trade practices, declaring reciprocal tariffs as part of his “America First” policy. Steep US duties on Indian exports—ranging from 15% to 35%—have raised compliance burdens and dampened competitiveness. Yet, amidst the threat of reduced market access, there lies an opportunity: India can renegotiate tariffs, attract shifting supply chains, and enhance its manufacturing footprint.
In 2024, US-India trade reached USD 129.2 billion, with India running a trade surplus of over USD 45 billion. As tariffs redefine cost structures and preferences, India must balance protecting domestic interests with preserving US market access through agile trade diplomacy and reforms.
The sector-wise impact of the US’s reciprocal tariffs policy include:
Exports to the US were valued at USD 9 billion in FY24. While largely exempt from the new tariffs, the industry faces margin pressures if exemptions are withdrawn in future rounds.
High US duties could hit Indian exports of vegetables and processed foods. To reduce some friction, India is negotiating tariff cuts on almonds, lentils, cranberries, and pistachios.
Increased duties on garments may impact this labour-intensive sector, leading to reduced competitiveness, lower revenues, and employment losses.
While tariffs do not directly impact services, a potential tightening of H-1B visa norms could affect Indian IT firms’ operations in the US
Affected by the existing 25% Section 232 tariffs, India’s small share of US steel imports may result in dumping from other countries, disturbing local markets.
Tariff cuts by India (e.g., motorcycles from 50% to 30%) may be offset by reciprocal US tariffs, impacting export competitiveness in a niche but high-value category.
India has cut duties on bourbon and wines as part of negotiation tactics. However, reciprocal tariffs could still impact premium segments.
These sectors face rising US duties. However, India can gain as an alternative to Chinese exporters, especially under the production-linked incentive (PLI) scheme.
The May 2025 Geneva agreement between the US and China marked a temporary pause in escalating trade tensions. This initial deal introduced a 90-day tariff truce beginning 14 May 2025, reducing US duties on Chinese goods from 145% to 30%, and China reciprocating by slashing tariffs from 125% to 10%. While a welcome relief for global markets and supply chains, the deal left untouched core security-related levies, including those under Sections 301 and 232.
China also agreed to remove specific non-tariff barriers, such as restrictions on rare earth exports. However, sectors such as semiconductors and fentanyl precursors remain outside the truce. The agreement provides temporary stability but fails to resolve deeper structural disputes.
While the pause alleviates global trade strain for India, it also revives competition from China, particularly in export-oriented sectors. Indian exporters must use this window to consolidate their US market share and diversify trade relationships.
In a sweeping move, President Trump declared a national emergency under the IEEPA in April 2025 and imposed new tariffs dubbed the “Liberation Day” tariffs. A baseline 10% ad valorem duty was imposed on all imports from 5 April, escalating to as much as 50% for specific countries, including a 26% duty on Indian goods – a huge tariff impact. Exemptions were carved out for sectors like pharmaceuticals, energy, and semiconductors.
India, grouped among 60 high-deficit countries, faced punitive tariffs reflecting its own high tariff walls. The move directly challenged the WTO norms and the MFN principle. Although tariffs such as those on autos and steel were covered under other provisions like Section 232, these new reciprocal duties applied across broader categories.
These US tariffs heightened costs for Indian exporters and disrupted long-standing supply chain relationships. However, they also incentivised India to recalibrate its trade strategy, reduce tariff asymmetries, and pursue bilateral deals offering better market access in return for concessions.
The US Court of International Trade had earlier invalidated the “Liberation Day” tariffs, ruling that President Trump had exceeded his constitutional authority under the IEEPA. The court emphasised that such sweeping tariff actions lacked clear congressional guidance and violated the non-delegation doctrine.
However, on 29 May 2025, the US Court of Appeals issued a temporary stay, allowing the US tariffs to remain in effect during the appeals process. This move preserves the status quo, maintaining tariff collections while the legal battle continues. The decision adds uncertainty for global businesses, who must now navigate shifting trade policies amid unresolved judicial interpretations.
Grant Thornton Bharat offers end-to-end support to help Indian businesses manage the ripple effects of the US’s reciprocal tariff regime. Our approach includes:
Impact assessments to evaluate immediate and long-term exposure across sourcing and markets.
Advisory on maximising the 90-day tariff pause window to renegotiate contracts and optimise supply chains.
Support for supply chain restructuring, including tie-ups in low-tariff zones or relocation to India.
Grant Thornton Bharat’s insights on US’s Reciprocal Tariffs Policy
