US President Donald Trump’s world wide reciprocal tariffs come into effect Wednesday. Trade partners to the biggest economy in the world can now either retaliate, concede, or just worry.

As NDTV Profit reported earlier, India is not planning a knee-jerk reaction to the reciprocal tariffs. New Delhi’s primary focus remains on finalising the bilateral trade agreement with Washington DC, which is expected to be concluded as early as August.

In the interim, analysts see several ‘bargaining chips’ that India holds to moderate the impact of Trump tariffs.

Import More

Kotak Securities states that it could be easier for India to deal with reciprocal tariffs by increasing imports from the US to protect its existing exports to the US. Notably, while the US accounted for around 19% of India’s total exports in the fiscal ended March 2024, our imports from the nation were only 6.6% of its total outward trade.

Emkay, Jefferies and Kotak Securities note two items that India can import more from the US:

  • Oil and Gas: Emkay states that increasing Indian imports of US energy is an easy and beneficial concession that can be offered to the US. Moreover, US sanctions on Russia’s fleet have made it difficult for Indian importers to access Russian crude easily. But the caveat here is that transporting crude oil from the US to India is $2.5 per barrel more expensive than transporting oil from West Asia. So if prices were made competitive, we could ramp up American crude oil purchases.

  • Defence Purchases: Higher defence equipment purchases from the US could also lower our reliance on Russia. Currently India imports only 2% of our total defense equipment from the US, while Russia accounts for 59%.

Less Tariffs

Another approach for India can be to lower tariffs. India’s tariffs on agricultural goods were specifically called out in the White House statement on reciprocal tariffs. This indicates that the area is a highly visible point of contention for the US. Emkay suggests that India can lower tariffs on certain agricultural products since the US already accounts for a significant chunk of Indian imports within certain categories. For example, 25% of our total fruit and nuts imports in fiscal 2024 came from the US. This was despite India’s average import tariff of 17.4% in this category.

Prabhudas Lilladher notes that India could also lower duties on alcohol, specifically wines and whiskey which have an import tariff of 150%.

Another space that India could looks at is automobiles. Currently on average India charges US imports a tariff rate of 110%. Analysts say that we could bring this rate down, especially for electric vehicles. This would primarily benefit Tesla, allowing it to enter the Indian market at lower prices. Emkay notes highlights Elon Musk’s close relationship with US President Trump, and how a deal like this this would go down very well and could also bring concessions from the American side.

. Read more on Business by NDTV Profit.India’s focus remains on finalising the bilateral trade agreement with the US.  Read MoreBusiness, Economy & Finance, World, Notifications 

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