Steeper US reciprocal tariffs on Asian peers could aid Indian exports

Prime Minister Narendra Modi and US President Donald Trump

The United States' (US) has dealt India relatively better cards versus its Asian peers through its reciprocal plan, presenting the South Asian nation with an opportunity to spur exports in key sectors.

While, America would now charge India a “discounted reciprocal tariff” of 26 percent, New Delhi's Asian peers and neighbours such as China will face a steeper 54 percent (including 20 percent announced earlier), Vietnam will see an imposition of 46 percent, Bangladesh has been levied a higher duty of 37 percent followed by Thailand at 36 percent and Taiwan at 32 percent.

"Asia has been hit much more than India on tariffs and India is less export-exposed vs emerging market nations in Asia," Emkay Global's Chief Economist Madhavi Arora pointed out.

Global Trade Research Initiative's Founder Ajay Srivastava said that the imposition of higher reciprocal tariffs by the United States on several Asian countries, including China, Vietnam, Taiwan, Thailand, and Bangladesh, presents an opportunity for India to strengthen its position in global trade and manufacturing.

"However, gains will not accrue automatically. India needs deep reforms for enabling scale production, domestic value addition and improving competitiveness to benefit," Srivastava added.

Arora, however, warns, that India will also face some of the fallout from higher tariffs imposed by US on emerging market economies in Asia.

India’s exports to the US could drop by $30-33bn at 26 percent tariffs without adjusting for cross country hits or responses, Arora added.

Srivastava says that while Indian textiles and garments exports to the US could benefit from steeper tariffs on China and Bangladesh, higher US duties on Vietnam and Thailand creates an opportunity for New Delhi to spur outbound shipments in the electronics, telecom, and smartphone sectors.

Federation of Indian Export Organisations (FIEO) President S C Ralhan said while higher US tariffs do present challenges, India’s position remains comparatively favorable in relation to key competitors such as Vietnam, China Indonesia, Bangladesh, Sri Lanka, and Myanmar.

GTRI's Srivastava adds that sectors like machinery, automobiles, and toys, where China and Thailand currently lead, are also vulnerable to tariff-related relocation.

"With strategic planning, India can attract foreign direct investment in these areas, scale up domestic production, and cater to markets like the US that are seeking alternate sources for imports," Srivastava adds.

US President Donald Trump on April 3 announced a baseline 10 percent tariff on imports from all foreign countries along with steeper duties on around 60 nations, including India.

US is seen imposing this 10 percent tariff on India and the rest of the world from April 5 and another 16 percent on India from April 10.

India-US trade deal

Experts are also betting on the timely conclusion of a Bilateral Trade Agreement (BTA) between India and the US to mitigate Trump's reciprocal tariffs and provide relief to Indian exporters.

"Such an agreement could establish a structured framework for resolving tariff challenges , thereby reducing the likelihood of unilateral trade measures or retaliatory tariffs," FIEO's Ralhan said.

Arora agrees that India could clinch some "easy wins" through the potential trade agreement with US by lowering duties on certain farm and automobile products in exchange for tariff concessions from America.

India and the US are currently discussing the contours of a Bilateral Trade Agreement (BTA), which is part of a new goal – "Mission 500” – aiming to more than double bilateral trade in goods and services to $500 billion by 2030, as agreed during Prime Minister Narendra Modi’s visit to America on February 13.

Both nations are looking to agree to the first tranche of a mutually beneficial, multi-sector BTA by the fall of this year.

In 2023, bilateral trade in goods and services between India and the US stood at $190.08 billion.

India ranked tenth among the top nations that export to US, at $91 billion in 2024, with Mexico, China and Canada occupying the top three positions, while America is India's top export destination, and its fourth-largest source of imports.