Trump announces reciprocal tariffs on US trading partners: 'India very hard place to do business'

Donald Trump

US President Donald Trump signed a plan on February 13 to hike tariffs on trading partners, possibly setting up a global economic standoff.

The new round of sweeping reciprocal tariffs, aimed at boosting America’s revenue, risks igniting a global trade war and could worsen the country’s rebounding inflation problem.

"On trade, I have decided that for the purpose of fairness, I'll charge reciprocal tariffs - meaning, whatever countries charge the United States of America, we will charge them - no more, no less. They charge us with tax and tariffs, it's very simple we will charge them with exact tax and tariffs," said Trump.

“It's fair to all. No other country can complain,” he added.

Trump also singled out India has a country that is "at the top of the pack" when it comes to tariffs.

"India is right at the top of the pack. India charges tremendous tariffs. I remember when Harley Davidson couldn't sell their motorcycles in India because the tariffs were so high. They had to build a factory in India to avoid paying tariffs. Similarly, people can build a factory here ..." Trump said, pushing his "America First" goal.

When asked if SpaceX CEO Elon Musk, who met with PM Modi earlier in the day, spoke with the Prime Minister as a government worker or a tech magnate, amid concerns the meeting was related to the billionaire's business dealings, the US President again targeted India over high tariffs.

“India is a very hard place to do business because of the tariffs. They have the highest tariffs, just about in the world, and it's a hard place to do business... No, I would imagine he (Musk) met possibly because, you know, he's running a company," Trump said.

The politics of tariffs could easily backfire on Trump if his agenda pushes up inflation and grinds down growth, making this a high stakes wager for a president eager to declare his authority over the US economy.

The tariff increases would be customised for each country with the partial goal of starting trade new negotiations. But other nations might also feel the need to respond with their own tariff increases on American goods.

As a result, Trump may need to find ways of assuring consumers and businesses that growth to counteract any uncertainty from the possible fallouts from his tariffs.

Trump's proclamation identifies value added taxes — which are similar to sales taxes and common in the European Union — as a trade barrier to be included in any reciprocal tariff calculations, according to a senior White House official who insisted on anonymity to preview the details on a call with reporters.

Other nation's tariff rates, subsidies to industries, regulations and possible undervaluing of currencies would be among the factors the Trump administration would use to assess tariffs.

The official said that the expected tariff revenues would help to balance the expected USD 1.9 trillion budget deficit. The official also said the reviews needed for the tariffs could be completed within a matter of weeks or a few months.

The possible tax increases on imports and exports could be large compared to the comparatively modest tariffs that Trump imposed during his first term. Trade in goods between Europe and the United States nearly totalled USD 1.3 trillion last year, with the United States exporting USD 267 billion less than it imports, according to the Census Bureau.

The president has openly antagonised multiple US trading partners over the past several weeks, levying tariff threats and inviting them to retaliate with import taxes of their own that could send the economy hurtling into a trade war.

Trump has put an additional 10 per cent tariff on Chinese imports due to that country's role in the production of the opioid fentanyl. He also has readied tariffs on Canada and Mexico, America's two largest trading partners, that could take effect in March after being suspended for 30 days. On top of that, on Monday, he removed the exemptions from his 2018 steel and aluminum tariffs. And he's mused about new tariffs on computer chips and pharmaceutical drugs.

The EU, Canada and Mexico have countermeasures ready to inflict economic pain on the United States in response to Trump's actions, while China has already taken retaliatory steps with its own tariffs on US energy, agricultural machinery and large-engine autos as well as an antitrust investigation of Google.

The White House has argued that charging the same import taxes as other countries do would improve the fairness of trade, potentially raising revenues for the US government while also enabling negotiations that could eventually improve trade.

But Trump is also making a political wager that voters can tolerate higher inflation levels. Price spikes in 2021 and 2022 severely weakened the popularity of then-President Joe Biden, with voters so frustrated by inflation eroding their buying power that they chose last year to put Trump back in the White House to address the problem. Inflation has risen since November's election, with the government reporting on Wednesday that the consumer price index is running at an annual rate of 3 per cent.

The Trump team has decried criticism of its tariffs even as it has acknowledged the likelihood of some financial pain. It says that the tariffs have to be weighed against the possible extension and expansion of Trump's 2017 tax cuts as well as efforts to curb regulations and force savings through the spending freezes and staff reductions in billionaire adviser Elon Musk's Department of Government Efficiency initiative.

But an obstacle for this approach might be the sequencing of the various policies and the possibilities of a wider trade conflict stifling investment and hiring amid the greater inflationary pressures.

Analysts at the bank Wells Fargo said in a Thursday report that the tariffs would likely hurt growth this year, just as the extended tax cuts could help growth recover in 2026.

“Tariffs impart a modest stagflationary shock to an economy," the report said. “The US economy entered 2025 with a fair amount of momentum, but we look for real GDP growth to downshift a bit over the next few quarters as the price-boosting effects of tariffs erode growth in real income, thereby weighing on growth in real consumer spending.”

(With inputs from agencies)