US President Donald Trump's announcement on imposing reciprocal tariffs has created an uncertain trade environment between India and America, though the plan for a major trade deal could help promote two-way commerce, experts say.
They said that India should take steps cautiously for protecting domestic industries and expanding exports to the US.
After talks with Prime Minister Narendra Modi in Washington, Trump has announced that India will buy more oil, gas and military hardware from America to bring down the trade deficit but asserted that Washington will not spare New Delhi from reciprocal tariffs.
Economic think tank Global Trade Research Initiative (GTRI) said that the two leaders talked about having a trade agreement soon, but the details remain unclear.
The US, GTRI Founder Ajay Srivastava said, is not clear if the reciprocal tariff applies to specific products or entire sectors.
Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai said that India must strike a balance between protecting domestic industries and expanding exports to the US through targeted diplomacy.
"We should negotiate exemptions for key sectors, highlighting recent tariff concessions on US goods as leverage.
"A limited preferential trade agreement can further ease tariff concerns without requiring a full-scale FTA (free trade agreement)," he said.
Trade policy expert Abhijit Das said that the announcement of reciprocal tariffs has created uncertainty in trade relations between the two countries and that these duties "really shred" the WTO (World Trade Organization) rule book.
"Reciprocal tariff is a highly problematic issue because there are many variables which the US will take into account while deciding their customs duties," Das said, adding customs duties are just one of the variables.
It can also include exchange rate, non-tariff barriers, subsidies, hurdles in government procurement, protection of intellectual property.
"So how the reciprocal tariffs will be quantified and converted into final tariff is a big question and it needs more analysis," he said.
Regarding the trade deal, Das said there was no direct reference to the start of formal negotiations, adding, "I presume it is more about addressing concerns and interests related to a handful of products."
Sharing similar views, international trade experts Biswajit Dhar said as part of imposing reciprocal tariffs, the Trump administration may force India to reduce duties on sectors like agriculture else the US would impose higher duties on Indian goods.
"But these announcements have created an uncertain trade environment and our exporter should be worried because the US is the largest market for them," Dhar said, adding India needs to watch the terms of the trade deal before taking any stand.
"We need to tread cautiously with this deal," he said.
The US president, at a joint media briefing with the Indian prime minister following the talks, also said that both sides are looking at striking a major trade deal soon while calling import duties imposed by India on certain US products as "very unfair" and "strong".
Whatever India charges, we will charge them," Trump has said, adding "We are being reciprocal with India."
The Modi-Trump meeting took place hours after the US President announced a new reciprocal tariff policy for all the trading partners of the US in the latest in a series of such actions initiated by his administration.
In his remarks, Trump said he and PM Modi have reached an agreement that could potentially make the US the "number one supplier" of oil and gas to India, suggesting it to be part of measures to bring down the US trade deficit with India that stands at around $45 billion.
Trade deal:
During the first term of President Donald Trump, India and the US had discussed a mini trade deal to boost economic ties.
It was shelved by the Joe Biden administration as they were not in favour of a free trade agreement.
According to international trade experts, a trade deal between a developing and a developed nation should cover the maximum number of goods traded between them, as per WTO norms.
A mini trade deal should have a roadmap to eventually convert it into a comprehensive free trade agreement.
WTO deals with global trade. Both India and the US are members of the Geneva-based body.
Bilateral trade:
During April-November 2024-25, the US was the second largest trading partner of India with $82.52 billion bilateral trade in goods ($52.89 billion worth of exports, $29.63 billion of imports and $23.26 billion trade surplus).
During 2021-24, America was the largest trading partner of India.
According to GTRI, the top 100 US export products account for 75 per cent of India's total imports from that country.
While India's simple average tariff is 17 per cent, the actual duties on key US imports are much lower.
In 2024, India's main exports to the US included drug formulations, biological ($8.1 billion), telecom instruments ($6.5 billion), precious and semi-precious stones ($5.3 billion), petroleum products ($4.1 billion), gold and other precious metal jewellery ($3.2 billion), ready-made garments of cotton including accessories ($2.8 billion), and products of iron and steel ($2.7 billion).
Imports included crude oil ($4.5 billion), petroleum products ($3.6 billion), coal, coke ($3.4 billion), cut and polished diamonds ($2.6 billion), electric machinery ($1.4 billion), aircrafts, space crafts and parts ($1.3 billion), and gold ($1.3 billion).
GTRI has said that petroleum crude faces a minimal duty of Re 1 per tonne, while cut and polished diamonds are taxed at zero per cent, as most are reimports.
Other major imports, including coking coal, aeroplanes over 15,000 kg, steam coal, and liquefied natural gas carry a modest 2.5 per cent duty.
Gold in unwrought non-monetary forms is taxed at 6 per cent, while aluminium scrap enjoys nil duty. Almonds are subject to a duty at Rs 35 per kg.
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