Impact Of Reciprocal Tariffs On India To Be Minimal — Read Motilal Oswal's Analysis

The Trump administration introduced the Reciprocal Tariff Plan (a strategy to equalize tariffs, taxes and non-tariff barriers with other nations) on Feb, 13, 2025, allowing the US to raise tariffs on countries with a trade deficit. The first set of reciprocal tariffs is expected on April, 02, 2025. The tariff structure shows that India charges higher tariff rates in most product categories. The weighted average tariff rate imposed by India on imports from the US was ~12% in CY23, while the tariff charged by the US on Indian imports is ~3%, leading to a tariff differential of 9%. This could lead to roughly 12pp (product-level full reciprocity) increase in US effective tariff rates on Indian imports.

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Motilal Oswal Report

The US is one of the largest trading partners of India, with bilateral trade of $124 billion in CY24. Exports from India to the US reached $81 billion, and imports from India to the US amounted to $44 billion, resulting in a trade surplus of $37 billion for India in CY24.

The US is India’s largest export destination, with its share reaching 18% in CY24 from 13% in CY14 and 6% in CY06. Notably, India’s imports from the US (as a % of total imports) have remained stable at ~6% in CY24 versus ~5% in CY14.

India’s top exported items to the US are electronics (15.6% of total exports to the US), gems and jewelry (11.5%), pharma products (11%), machinery for nuclear reactors (8.1%) and refined petroleum products (5.5%).

India’s top imported items from the US are energy commodities like crude oil, natural gas and coal (30.7% of the total imports from the US), pearls/precious stones (11.8%), machinery (9.5%), electronics (6.8%), and aircraft and parts (4.6%).

India's goods trade surplus with the US has seen a two fold increase in the past decade, rising from $19 billion (0.9% of India's GDP) in CY15 to $37 billion (1.0% of GDP) in CY24. The surge in the trade surplus is primarily attributed to a heightened trade surplus in electronic items after the implementation of a production-linked incentive scheme in 2020.

Apart from electronic items, higher exports of pharma and textiles have driven India’s trade surplus with the US over the past decade.

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