Can trade deal, dissimilar export profiles secure India from Trump’s reciprocal plan?

Prime Minister Narendra Modi and US President Donald Trump

India has often been targeted by US President Donald Trump for steeper tariffs, raising concerns over the impact of America’s reciprocal plan on Indian trade and commerce, which is set be unveiled in a few hours.

Even as Trump repeatedly termed India as a “tariff abuser”, especially on farm and automobiles, New Delhi has been betting on the ongoing talks for a trade deal with US to ensure a softer stance for the country when it comes to America’s Fair and Reciprocal Plan.

Trump is set to announce a new set of tariffs on April 2, 4 pm Eastern Time in the United States, which is 1.30 am on April 3 for India.

India’s commerce ministry however treated April 2, even with the announcement for reciprocal tariffs around the corner, as any other, with officials hosting briefings for its upcoming Startup event and some others conducting internal meetings on various trade related issues.

New Delhi’s confidence seemingly comes from the fact that it is already readying a policy pill to pacify Trump and is agreeable to cutting tariffs on a host of sectors such as gems and jewellery, automobile parts, textiles, chemicals as part of the proposed trade deal with US.

India and the US are looking to agree to the first tranche of a mutually beneficial, multi-sector Bilateral Trade Agreement by the fall of this year.

Infact, both nations concluded another round of talks on March 29 with the assistant US trade representative Brendan Lynch where New Delhi is said to have sought an exception from President Trump’s tit-for-tat tariff plan.

Last month, Treasury Secretary Scott Bessent told Fox Business that the US administration’s tariff focus would be on 10 to 15 nations with the most significant trade imbalances, though he did not specify which ones.

While specific countries were not mentioned, data from the US Commerce Department shows America has the largest trade deficit with the likes of China, the European Union, Mexico, Vietnam, Taiwan, Japan, South Korea, Canada, India, Thailand, Switzerland, Malaysia, Indonesia, Cambodia, and South Africa.

This clearly indicates that India could be one of the key targets for US’s reciprocal plan.

However, officials are relying on the country’s dissimilar export profiles to blunt the impact of reciprocal tariffs, if any.

“We have to see first whether US will levy it on products or sectors as whole when it comes to their reciprocal plan. Since India and US’s export profiles are not similar, reciprocal tariffs on certain products should not impact us much and option to retaliate is always there if needed,” an industry source had told Moneycontrol earlier.

While India’s largest exports to the US includes engineering goods, electronic products, drugs and pharmaceuticals, along with gems and jewellery, America’s outbound shipments into India are starkly different, mostly comprising crude oil, petroleum products, coal and cut and polished diamonds.

On the other hand, India, unlike many countries have not taken the retaliatory route so far given minimal impact from the steps Trump has already taken on tariffs.

On March 26, Trump signed an order imposing a 25 percent duty on imported cars and auto components. It comes into effect from April 3. It has already levied a 25-percent duty on steel and aluminium and other such levies on countries including China, Mexico and Canada.

The Indian government does not expect any major fallout from higher levies on steel and aluminium as well as automobiles given that Indian exports have limited exposure to the US market in these sectors.

While dissimilar export profiles and a potential trade deal with US could shield India from the worst of reciprocal tariffs, a lot will depend on the details of Trump’s plan, specifically if the tit-for-tat duties are imposed sector-wise or product-wise.

India ranks tenth among the top nations that export to US, at $91 billion in 2024, with Mexico, China and Canada occupying the top three positions.

The US is India's top export destination, and its fourth-largest source of imports.