India’s top officials said they will continue to cut import taxes as the government looks to work around U.S. President Donald Trump’s plan to impose reciprocal tariffs on trading partners.
Weeks after she unveiled sweeping cuts to duties on imports from textiles to motorcycles, India’s finance minister said that she will carry on the process of reforming the nation’s tariff regime.
“We are building to be an investor-friendly country, and as a result, the duty cuts and the rationalization that have been announced is a continuing process and we shall keep doing that,” Nirmala Sitharaman said at an event in Mumbai on Monday.
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Economists said India’s higher tariff rate and a $41 billion trade surplus with the U.S. makes the South Asian nation among the most exposed to risks if Trump follows through with plans to impose like-for-like tariffs. Analysts from Mitsubishi UFJ Financial Group Inc said U.S. tariffs on India could rise to above 15%, from around 3% currently, “if full reciprocity were enforced in theory.”
While it is still unclear how the Trump administration will calculate tit-for-tat levies, if the US were to impose a 20% flat tariff on Indian exports, it could result in a loss of 50 basis points to gross domestic product, according to Soumya Kanti Ghosh, chief economic adviser at State Bank of India. An average hike of 15%-20% in tariffs could reduce India’s overall exports to the US by 3-3.5%, he said.
Prime Minister Narendra Modi is keen to avoid any further slowdown in the economy, which is already growing at its weakest pace since the pandemic. To head off a potential trade war with its biggest trading partner, New Delhi has delivered a rapid series of concessions to the White House on issues core to Trump’s agenda. That process is likely to continue in the coming months, officials signaled this week.
Following the meeting between Trump and Modi in Washington last week, the two sides had agreed to seal a trade deal as soon as fall of 2025. The Indian leader said the nations have also set a goal of doubling bilateral trade to $500 billion by 2030.
India and the U.S. will aim for a reduction of tariffs in coming months, an Indian official told reporters on background, asking not to be identified in order to discuss internal matters. New Delhi will wait to see what measures the U.S. imposes, but will work on a trade agreement that’s beneficial to both parties, the official said.
Indian officials have also been attempting to fight the narrative that the country imposes unreasonable tariffs. At the Mumbai event on Monday, Finance Secretary Tuhin Kanta Pandey said that the country has tariff rates of under 3% on “30 most important imports into India.” The higher duties are on “very few products,” he said, adding that those “things probably will get sorted out” during negotiations with the U.S.
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