In an attempt to rebalance trade relations, the US president signed a measure on Thursday instructing the US Trade Representative and Commerce Secretary to propose new tariffs on a country-by-country basis. An extensive procedure that might take weeks or months to finish.
This move, made ahead of his meeting with Prime Minister Narendra Modi, intends to rectify the long-standing trade imbalance that occurs when the US maintains a relatively open economy while other nations impose hefty taxes on US exports.
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What are reciprocal tariffs?
Taxes imposed on imported goods are known as tariffs. With reciprocal tariffs, trading partners are subject to duties equal to those imposed on American goods.
Trump frequently brought up reciprocal tariffs during his presidential campaign, saying,
"If India, China, or any other country hits us with a 100 or 200 percent tariff on American-made goods, we will hit them with the same exact tariff. In other words, 100 percent is 100 percent. If they charge us, we charge them - an eye for an eye, a tariff for a tariff, same exact amount."
- US President Donald Trump
Why does President Trump want to impose reciprocal tariffs?
President Trump said reciprocal taxes would apply to all countries with no exceptions. Speaking to reporters at the Oval Office, he also claimed that US allies were frequently worse than rivals on trade.
“I have decided for purposes of fairness that I will charge a reciprocal tariff. It is fair to all. No other country can complain,” the US President said.
Since assuming office, Trump has declared a wide range of tariffs aimed at some of the largest trading partners of the United States, claiming that they will help tackle unfair practices.
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How does it affect India?
In the past, Trump has called India a "very big abuser" of import taxes. So, we naturally are going to be one of the most affected countries under the circumstances.
India is the most susceptible to reciprocal tariffs since it has one of the highest relative tariff rates among the nations. According to Nomura Holdings, the weighted average effective tariff imposed by India on US exports to India is 9.5%, whereas the tariff rate on Indian exports to the US is 3%.
"India has been to us just the highest tariff nation anywhere in the world. They have been very strong on tariffs. I don't blame them unnecessarily, but it's a different way of doing business. It's very hard to sell in India because of hard barriers."
- US President Trump during the press conference at the Oval OfficE
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‘India is a very hard place to do business’: President Trump
During the press conference at the Oval Office, when asked about what PM Modi & Elon Musk are in talks about, the US President assumed that the Tesla CEO wishes to do business in India, and this was his reaction -
“But India is a very hard place to do business in because of the tariffs. They have the highest tariffs. It's a hard place to do business. I would imagine he met possibly because he is running a company, he is doing this as something that he has felt strongly about for a long time,”
- US President Trump in talks with the media
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