‘Whatever you charge, I’m going to charge’: Trump on tariff talks with PM Modi

Trump’s comments follow India’s decision to slash tariffs on a range of US products, such as bourbon whiskey, ahead of both countries announcing a trade deal aimed at doubling trade. Indian government officials stated that India hopes to secure concessions during the trade deal negotiations.

Reiterating concerns over high tariffs, Elon Musk, advisor to the US government and CEO of Tesla and X, called Indian tariffs “unfair”. Notably, Musk also met with PM Modi and top Indian officials during Modi’s visit to the US last week. “The tariffs (in India) are like 100 per cent import duty,” Musk said.

Impact of reciprocal tariffs on India

While the details of reciprocal tariffs are expected in April, experts point out that India’s tariff rates are higher than those of the US on most products, with the largest difference in agricultural products, textiles, and pharmaceuticals.

Goldman Sachs, in a report, stated that India could be affected by Trump’s tariffs at a country level, product level, or through non-tariff barriers, which could complicate trade relations between the two nations.

At the country level, the report noted that reciprocity would be the simplest to implement. If applied at the product level – where the US matches India’s tariffs on each imported product – “this may increase the average tariff differential by ~11.5 percentage points but would be more complex and require a longer implementation timeline.”

“Reciprocity through non-tariff barriers, such as administrative restrictions, import licences, and export subsidies, is the most complicated approach, given the challenges of estimating non-tariff barriers. However, it could lead to even higher tariffs at either the product or country level,” Goldman Sachs said.

India’s exposure to reciprocal tariffs

India’s bilateral goods trade surplus with the US has doubled over the last decade to $35bn – approximately 1 per cent of India’s GDP in FY24 – largely driven by exports of electronics, pharmaceuticals, and textiles.

“India’s gross exports to the US are among the lowest compared to its emerging market peers, at 2.0 per cent of GDP. We estimate a potential domestic GDP growth impact of 0.1-0.3 percentage points under different scenarios of an increase in the US’s effective tariff rate on Indian exports, depending on whether reciprocity is applied at the country or product level and based on different estimates of US demand elasticity for Indian exports,” the Goldman Sachs report said.

However, in the case of global tariffs imposed by the US on all countries, India’s exposure to US final demand – factoring in exports via third countries – would be roughly twice as high (~4.0 per cent of GDP). This could lead to a potential domestic GDP growth impact of 0.1-0.6 percentage points, the report added.