Government expects minimal impact of Trump's reciprocal tariffs, higher auto, steel levies

India and US are presently negotiating the first tranche of a mutually beneficial, multi-sector BTA by fall 2025.

The government expects minimal impact of US President Donald Trump’s reciprocal tariff plan, expected to come into effect from April 2, as most goods vulnerable to the move aren’t price sensitive.

“Even if the US imposes higher tariffs on key Indian exports such as basmati rice, the item isn’t price sensitive and hence the impact won’t be large,” a senior government official said.

The comments also come at a time when a US delegation is in India for three-day talks in which trade is expected to take the centre stage.

The government also does not expect any major fallout from higher levies on steel and aluminium as well as automobiles. It is expected to take its time in deciding on any tariff reductions through a proposed trade deal with America, the official added.

“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 told Moneycontrol.

Trump has repeatedly singled out India calling it "tariff king" and "hard to do business in", sparking fears that the country may be specifically targeted.

While he is expected to impose higher tariffs from April 2 on countries that levy steeper duties on American goods under his Fair and Reciprocal Plan, the US has already slapped duties on products certain products.

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.

It is not immediately clear if US wants to impose the tit-for-tat levies sector-wise or product-wise.

Earlier this month, the steel secretary said the industry does not see a major impact of US tariffs as it doesn’t not export much to the country.

"To US, we export less than 100,000 metric tonnes," Sandeep Poundrik told reporters in New Delhi.

Even on automobiles, the 25 percent tariff will have no real effect on India’s thriving car export business given its negligible exposure to the American market, Global Trade Research Initiative (GTRI) said on March 27.

India exported a modest $8.9 million worth of vehicles to the US in 2024, compared to $6.98 billion in global exports — meaning just 0.13 percent of the country’s car exports are US-bound.

Some Indian economists have also been pointing out that reciprocal tariffs may not have a big impact on Indian exports.

The SBI Research said in a note on March 17 that Trump’s plan to impose reciprocal tariffs may only lead to a 3-3.5 percent decline in exports, with the effect being negated by higher exports.