US has plan to impose the reciprocal tariff taxes on India-US trade including other countries from April 2, 2025 on trade of goods, Reason being high tariffs imposed by these countries, to recover imbalance, decision is being taken by United States.
“And so we are being reciprocal with India. Whatever India charges, we charge them. So, frankly, it no longer matters to us that much, what they charge. I had discussions with India in the first term about the fact that their taxes were very high for exporting , and I was unable to get a concession”, Trump said.
Table of Contents
What is Reciprocal Tariffs?
Reciprocal is done to have a fair trade relationships and to avoid imbalance in the trade of goods. In reciprocal, the United states will impose the tariffs which will match the taxes imposed by other countries on them. Taking a example, if a country impose a tax of 20% to United states ,the U.S. will too impose same tax to that country, which is a strategy or a plan by United states government to have a fairer relationship with other countries.
What will be it’s impact on India?
Due to high tariffs Indian trade policy will come under severe inspection. it would adversely impact to the Indian economy.
Taxes imposed by India to US:
| Year | Average Applied Rate |
|---|---|
| 2018 | 11.59% |
| 2019 | 12.34% |
| 2020 | 13.21% |
| 2021 | 14.05% |
| 2022 | 15.30% |
From the following table it is clear that India is consistently being increasing the tax rate yearly.it went from 11.59% (2018) to 15.30%(2022) which are too high and considered to be unfair by the US government.
Taxes imposed by US to India:
| Year | Average Rate on Indian Goods |
|---|---|
| 2018 | 2.72% |
| 2019 | 3.84% |
| 2020 | 3.83% |
| 2021 | 3.91% |
| 2022 | 3.83% |
From the above two table it is clear that the tariffs imposed by India to US is quite grater than the US to India on goods, which is the reason to neutralize the tariff rate is a planning by US government.
Thus, due to high tax rate many sectors like wood product, textiles, leather, agriculture can be affected by the US reciprocal tariffs. Also from the estimated analysis, Indian export will be expected to decline by $2-7 billion in FY2025-26.
Impact on several countries?
This plan of United states government to impose reciprocal tariffs rate on countries including Mexico, China, Canada for resolving imbalance, This has created a contributing thing for the disputes and creates the economic uncertainties and falls in markets ,inflation ,etc.
Understanding major developments in tariffs rates
- In the year 2018, United States imposes various charges on imports of steel and aluminum products, which affect the countries in exports and imports.
- Now in February 2025, president Donald Trump announces reciprocal taxes on the countries who charges them high tax rate.
India’s response to this imposition
The Indian government have no commitments regarding the reciprocal taxes. Trump also said that New Delhi has agreed to low tariff taxes, the Times of India reported. Also on Friday Donald trump said that India is finally ready to cut off tariffs after exposing the new Delhi.
“India charges us massive taxes. Massive. You can’t even sell anything in India. They have agreed, by the way; they want to cut their tariffs way down now because somebody is finally exposing them for what they have done” Trump said claimed by ANI.
Thus ,this will impact the India in such a massive way, affecting the trade in terms of exchange of goods.
Conclusion:
As a summary, United States plans to impose reciprocal taxes on several countries including India, China, Mexico, Canada . This is being done to promote fairness and neutralize the imbalance between the rates.
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Very informative!!