Donald Trump’s Mutual tariff The world is provoked. Global markets are coming back from shock and even experts are uncertain about how it will actually play. On April 2, 2025, the US President announced a ‘concession’ tariff on major economies, which see them as ‘unfair’ trade practices that harm the US economy.
A global stock market route, including the US and India, has been followed, as investors run to cover for a global economic recession and a potential American recession. The period of high inflation is being predicted – stagflation – economic growth or even contractions. Trump is firm on his decision on its part, and even states that the US economy requires this ‘drug’ for long -term benefits.
India is adopting a cautious approach to the issue, and the government is actively working on the US-India trade deal, which was announced during PM Narendra Modi’s US visit early this year. 26% of tariffs on India are higher than those that experts were estimated by experts, but the number is less than other countries.
April 9, 2025 is the date when new mutual tariffs are applied. Globally, experts have questioned the functioning of the US in coming with numbers for tariffs and even their supporters believe it is poor mathematics.
So how inappropriate is Trump’s tariffs and what should India do to counter its influence on the Indian economy? Weight of experts:
How unfair are the tariffs of Donald Trump?
According to the chart displayed by Donald Trump, India’s tariff and trade obstacles are 52%, China is 67%and 39%of the Europe Union. According to an AP report, the number on which Trump’s administration has calculated mutual tariffs is much higher than the real. According to the report, the World Trade Organizations placed India’s average tariff at 12%, which placed 3%of China and 2.7%of the European Union.
While the Trump administration has said that their functioning includes the impact of factors such as government subsidy, currency manipulation and other obstacles.
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The White House says it has done the size of a country’s trade imbalance on goods with the US and divides how much the US imports from that country. The resulting number is divided by half to reach the mutual tariff number.
The data below shows the weighted average tariff rate of countries that withstand the highest mutual tariff rates.
It is clear that their business partners are much less than the calculation of the weighted average tariffs trump administration implemented by countries on their business partners. The average tariff imposed by the choice of Myanmar, Vietnam and Laos is less than the tariff imposed by the US.
Donald Trump supporter, billionaire Bill Ekman has also questioned the functioning for tariff rate calculation. “The formula used to calculate the tariffs of other nations to calculate the tariffs used by the administration actually appears four times larger than them. President @REALDONALDTrum is not an economist and hence depends on their advisors to perform these calculations, so that they can determine the policy. (Earlier Twitter).
What should India do?
The Trump administration has so far not shown any inclination to take a nap on the implementation of mutual tariffs. However, he has shown openness to interact with countries, and India is already working on a trade agreement with the US.
So if there is no adjacent relief on tariffs on the horizon, what should the world do? What should India do to compete with Trump’s mutual tariff effect?
DBS Bank says the US announced 26% mutual tax on India, which is more than two and a half times of the current average tariff gap.
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“The method behind the hurry of tariff measures announced by the US on April 2 is simple – the more a nation is dependent on the US markets, the more tariff they face. It should be followed that a country can see the tariff relief in the future or to sell the minimum for the US. A recent report says Executive Director and Senior Economist Radhika Raw in a recent report. Stress should be open to America.
EY India Chief Policy Advisor DK Srivastava says that it may be easy for India to reduce its mutual tariff rate by increasing its imports from the US.
“Calculation indicates that if India has increased its imports from the US by 15% compared to the US $ 87.4 billion, while Indian exports are placed at the same level of US $ 133.1 billion in the US, the mutual tariff rate will go down to 16.2%, which will fall from 26% to 10%.”
“This is what India should focus on. India’s competitive countries may not find it easy to increase their imports from the US or reduce their exports to the US. In fact, many countries that are announcing the counterers by increasing their import duty rates, will face high tariff rates in the next round of calculations and will face relatively more malformations.”
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He said, “India should calibrate its policy, aimed at reducing the mutual tariff rate in each gradual phase of modification. Increasing India’s trade with America through a comprehensive trade agreement will work for India’s profit,” they say.
Madan Sabnvis, Chief Economist of Bank of Baroda, says that with the current mentality of making everything in the US, Indian companies can take advantage of this opportunity by establishing facilities for production here and bring diversity in their business.
India’s comparative advantage explained
Interestingly, India is slapped with 26% tariffs, the number is comparatively low when it comes to other major world economies. It can in turn can work in favor of India.
“India’s overall comparative disadvantage is much less than its rival countries as its overall dependence on exports is relatively low. The total share of goods and services in GDP is relatively low at about 22% and the export of goods is only 13% during 2021-22 to 2023-24. Srivastava.
He notes the following:
- In terms of textiles, countries such as Vietnam, Bangladesh, Sri Lanka and Cambodia come significantly, which will bear a large tariff loss on 46%, 37%, 49% and 44% respectively.
- In the case of electronic goods, China, European Union, Japan and South Korea will face competition, which will suffer comparatively large or almost similar tariffs with comparatively large or almost identical tariff damage with their respective tariff rates at 34%, 20%, 24%and 25%.
Radhika Rao of DBS Bank believes that India has comparative advantage in specific areas like electronics manufacturing for now as major competitive countries have to face high tariffs.
Madan Sabnavis says that 26% of tariffs on India are less than other emerging markets, with which we compete. “This can be an advantage to such an extent that we can score and replace exports from these countries. In addition, dialogues are going on on bilateral basis between India and the United States, which should help reduce the overall impact,” he explains TOI.
