Here's How India Can Capitalise On Trump's Tariff Threats To Boost Trade

Even as U.S. President-elect Donald Trump doubles down on his intentions to impose retaliatory, reciprocal tariffs on India, there could be a silver lining, leading to a boost in trade between the two countries.

“If they tax us, we tax them the same amount. They tax us. We tax them. And they tax us. Almost in all cases, they're taxing us, and we haven't been taxing them,” Trump told reporters on Tuesday about doing business with India.

While Indian tariffs comply with WTO rules, the proposed Trump tariffs would violate them, according to Ajay Srivastava, founder of trade body Global Trade Research Initiative.

"Even though Trump's claims about Indian tariffs may be overstated, India can seize this moment to strategically review its tariff structure. India's average tariff stands at 17%, significantly higher than the U.S.'s 3.3%, but comparable to countries like South Korea (13.4%) and China (7.5%)," he said.

Trump could target India's key exports, which in the fiscal year 2023-24 were:

• Medicines ($8.0 billion)

• Garments and Made-ups ($7.5 billion)

• Cut and Polished Diamonds ($5.6 billion)

• Smartphones ($5.6 billion)

• Solar Cells ($1.9 billion)

• Shrimps ($1.7 billion)

• Gold jewellery ($3.3 billion)

• Auto parts ($2.1 billion)

• Steel and steel products ($3.2 billion)

According to Srivastava, who quit the Directorate General of Foreign Trade in 2022, a targeted reduction in tariffs could be advantageous for India, aligning with its goal of boosting low-cost, value-added manufacturing and trade.

"With 85% of tariff revenue generated by fewer than 10% of tariff lines and 60% of lines contributing under 3% to revenue, India could lower its average tariff to around 10% without major revenue losses. Simplifying the tariff structure—reducing slabs from over 40 to just 5, capping the highest tariffs at 50%, and ensuring raw materials are taxed less than finished goods—would streamline the system while protecting domestic industries," he said.

Srivastava added that if Trump proceeds with unilateral tariffs against India, he will be violating the U.S. commitments at the WTO on tariffs. "In this case, India should be ready to respond decisively. In 2018, when the U.S. imposed tariffs on Indian steel and aluminium, India retaliated by increasing tariffs on 29 specific American products. This well-calibrated response ensured that India collected equivalent revenue from U.S. imports," he said.

While the Indian government has been optimistic about the incoming Trump administration, the US president-elect's statements on import tariffs have sent jitters and put.

Commerce and Industry Minister Piyush Goyal has said that Donald Trump is a "friend of India," and India-US friendship will only continue to blossom and grow further.

External Affairs Minister S Jaishankar said with Trump coming in, India could have to change terms of engagement since there is a belief that the world has been unfair to America.

"There will be a need to work out a political relationship with America under Trump 2.0. Trump has had a positive political view on India... Like everyone, we'll have issues, and we'll deal with them. Many countries are looking at Trump 2.0 as a political challenge, but we're not. We're in an advantageous position in how to convert Trump 2.0," Jaishankar had said earlier this month.