Opinion The Trump tarrif deadline is here. Here’s what India should do

On Tuesday, Indian stock markets traded lower — the BSE Sensex ended the day down 1.8 per cent — with investors weighed down by the uncertainty ahead of the April 2 deadline set by US President Donald Trump to levy reciprocal tariffs. Trump has called April 2 “Liberation Day”, ostensibly when the imposed tariffs will free the US from its dependence on foreign goods. Countries hoping for carve-outs or concessions are likely to be disappointed, with the president saying that “all countries” will be affected. Trump seems to be proposing the use of tariffs to achieve his geopolitical objectives. On Sunday, he said that secondary tariffs of 25 to 50 per cent would be levied on buyers of Russian oil if he felt that Moscow was blocking his efforts to end the war in Ukraine, a move that would impact India as well. Only a few days before that, Trump had signed a proclamation levying a 25 per cent tariff on automobiles and parts thereof.

Considering the nature of reciprocal tariffs, it is unlikely that such a regime will settle immediately. As reported in this paper, the US has around 200 trading partners (countries, territories and regional associations) and 12,500-odd tariff categories. Reciprocal tariffs could thus lead to many more new tariffs, managing which would be difficult for the US administration. India, which in the past has been described as a “tariff king” by Trump, faces a challenging situation. On Monday, the Office of the United States Trade Representative released the 2025 National Trade Estimate report, which details the trade barriers faced by US exports. As per the report, in 2023, India’s average Most-Favoured-Nation applied tariff rate was 17 per cent — “the highest of any major world economy”. The report also points towards “various forms of non-tariff barriers” and lists the forms that such barriers take across sectors in the economy. It notes that considering the large difference between the WTO bound and applied rates, “India has considerable flexibility to change tariff rates for both agricultural and non-agricultural products at any time, creating tremendous uncertainty”.

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India and the US have only just ended their talks to decide on the framework of a trade deal. The terms of reference have reportedly been finalised. Considering the sheer unpredictability of Trump’s tariff salvos, India should remain focused on pushing through this Bilateral Trade Agreement. Alongside this, it must finalise trade agreements with the EU and the UK. This moment also presents a unique opportunity for the Indian government to engage in a comprehensive assessment of its trade policy and reexamine both tariff and non-tariff barriers that impede greater integration with global supply chains. India has prospered when it has embraced free trade and globalisation, not when it has closed its doors. In the recent past, the government has taken some steps forward — it has signed trade agreements with Australia and the UAE. It must push ahead.