US President Donald Trump recently ordered his officials to develop Reciprocal Tariffs on imports to the United States from China, Canada, Mexico, India and other countries. "I have decided for purposes of fairness, that I will charge a reciprocal tariff, meaning whatever countries charge the United States of America, we will charge them. No more, no less," Trump had told reporters in February 2025. This announcement has led to fall of Stock Markets and rise of Gold prices. In spite of bonhomie between President Trump and PM Narendra Modi, US has threatened to levy reciprocal tariffs on India. Given the importance of this development, Reciprocal Tariffs by Donald Trump on India is a hot GD Topic for MBA Admissions and other admission process. Read this article to understand what, why, how and expected impact on India.
What is Reciprocal Tariff?
Reciprocal Tariff refers to a trade policy where two or more countries impose similar tariffs on each other's goods and services. If one country lowers or removes tariffs on imports from another country, the other country reciprocates by doing the same. For example, if Country A reduces tariffs on steel imports from Country B, Country B may respond by lowering tariffs on agricultural products from Country A. This approach is based on the principle of mutual benefit, aiming to promote balanced trade relations and reduce trade barriers between nations.
Why does President Trump want to impose reciprocal tariffs?
Trump believes that the US is being treated unfairly in global trade. He argues that many countries impose higher tariffs on US goods than the US does on theirs, creating an imbalance in trade.
President Trump is forcing major powers like China, Canada and the European Union to lower their duties, as he believes reciprocal tariffs will boost his "America First" economic policy by narrowing the country's trade deficit while improving the competitiveness of US manufacturers.
According to data from Global Trade Alert, an organization which assesses commerce policies, India levies tariffs that are typically between 5 and 20% higher than the US on 87% of imported goods. Trump has said he wants to match the levy on US imports that other countries apply to US products.
But economists have pointed out that the US actually benefits from having large trade imbalances with the rest of the world, as the dollar — the global reserve currency — is used in most trade, which offers major tailwinds to the US economy.
Which countries have the highest Trade Deficit with the US?
In 2024, China had the largest deficit in goods traded. Mexico’s deficit follows at -$172 billion, and the U.S. has a trade deficit of -$63 billion with Canada. Together, the three countries make up 41% of total U.S. imports. India is also one of the top 10 countries on trade deficit with the US.
| Rank | Country | Deficit (B) |
| 1 | China | -295 |
| 2 | Mexico | -172 |
| 3 | Vietnam | -124 |
| 4 | Ireland | -87 |
| 5 | Germany | -85 |
| 6 | Taiwan | -74 |
| 7 | Japan | -69 |
| 8 | South Korea | -66 |
| 9 | Canada | -63 |
| 10 | India | -46 |
Source: U.S. Census Bureau, 2025. Data covers goods only for 2024.
How will the US Reciprocal Tariffs plan work?
According to a White House memo, the US federal authorities have been given about six months to identify countries that impose higher tariffs than the US and recommend tariffs on a country-specific basis. However, the tariffs could take effect much before that deadline. The countries with the highest trade deficits are to be targeted first, including close US allies. Once approved, the reciprocal tariffs could be executed by the US government over other countries.
What is the likely impact of reciprocal tariffs on global economy?
Economists have cautioned that the tariffs previously introduced by Trump could increase consumer prices for imported goods in the US, fueling inflation. After a period of decades-high inflation following the COVID-19 pandemic, US inflation had significantly declined. However, in January, the consumer price index rose to 3%, marking the highest rate in six months.
S&P Global Ratings has projected that tariffs on China, Canada, and Mexico could cause a one-time increase of up to 0.7% in US consumer prices if the levies are fully implemented. However, the exact impact of reciprocal tariffs on US inflation remains uncertain until the measures are formally announced.
While some US domestic producers and retailers may benefit from Trump's tariff policy, they could also face higher costs for imported raw materials and potential supply chain disruptions. US exporters may suffer as well due to retaliatory tariffs from trading partners. Governments such as the EU and China have already announced countermeasures, and others are likely to follow.
What is the likely impact of reciprocal tariffs on India?
U.S. President Donald Trump criticised the high tariffs charged by India, terming them as “very unfair” and announced reciprocal tariffs from April 2. President Trump made these remarks in an address to the Joint Session of the Congress on March 4, 2025. President Trump has criticised the high tariffs charged by India and other countries, terming them as “very unfair” and announced reciprocal tariffs from April 2 on nations that impose levies on American goods.
Mr. Trump has made it clear to Prime Minister Modi, who visited the US recently, that India will not be spared from reciprocal tariffs. “India imposes a 30 to 40 to 60 and even 70% tariff on so many of the goods and, in some cases, far more than that. As an example, a 70% tariff on U.S. cars going into India, which makes it pretty much impossible to sell those cars.”
As per U.S. estimates, the U.S. total goods trade with India was an estimated $129.2 billion in 2024. The U.S. goods exports to India in 2024 were $41.8 billion, up 3.4% ($1.4 billion) from 2023. U.S. goods imports from India totalled $87.4 billion in 2024, up 4.5% ($3.7 billion) from 2023. The U.S. goods trade deficit with India was $45.7 billion in 2024, a 5.4% increase ($2.4 billion) over 2023.
Commerce Minister Piyush Goyal has visited Washington for trade talks with his U.S. counterpart.
How will countries try to avoid these Retaliatory Tariffs?
Trump's use of tariffs has heightened concerns about a global trade war and created significant uncertainty across various industries and countries. The announcement of reciprocal tariffs is expected to trigger a new round of negotiations that could lead to reduced levies on US exports.
India has already lowered tariffs on several goods in response to Trump's tariff threats. Indian Foreign Secretary Vikram Misri stated after a recent meeting between Trump and Prime Minister Narendra Modi in Washington that a deal to resolve trade issues could be reached within the next seven months.
In summary, US President Donald Trump has announced Reciprocal Tariffs on imports to the United States from China, Canada, Mexico, India and other countries. This announcement has led to fall of Stock Markets and rise of Gold prices. In spite of bonhomie between President Trump and PM Narendra Modi, US has threatened to levy reciprocal tariffs on India. Given the importance of this development, Reciprocal Tariffs by Donald Trump on India is a hot GD Topic for MBA Admissions and other admission process. Read above article to understand what, why, how and expected impact on India.
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