Why in news?

US President Donald Trump announced the implementation of reciprocal tariffs on trade partners starting April 2, regardless of their economic status.

In his Joint Address to Congress, he criticized both friendly and unfriendly nations, including India, China, and the European Union, for imposing higher tariffs on US products.

Trump highlighted India’s over 100% auto tariffs and claimed that countries like China and South Korea impose significantly higher duties compared to the US. He argued that these disparities have persisted for decades, despite US military and economic support to some of these nations.

What’s in today’s article?

• Current Status of Trade Between India and USA
• Uncertainty for India Amid US Tariff Plans
• Farm Sector Vulnerability Amid US Tariff Plans
• Auto and Pharma Sectors Face Tariff Risks
• US Challenges WTO’s Relevance and Policies

Current Status of Trade Between India and USA

• As per U.S. estimates, the U.S. total goods trade with India was an estimated $129.2 billion in 2024.
• The U.S. goods exports to India in 2024 were $41.8 billion, up 3.4% ($1.4 billion) from 2023.
• U.S. goods imports from India totalled $87.4 billion in 2024, up 4.5% ($3.7 billion) from 2023.
• The U.S. goods trade deficit with India was $45.7 billion in 2024, a 5.4% increase ($2.4 billion) over 2023.

Uncertainty for India Amid US Tariff Plans

• US President Donald Trump reiterated his criticism of India’s high tariffs, particularly in the auto sector, where duties exceed 100%.
• His remarks signal that ongoing trade negotiations may not secure concessions for India, especially on reciprocal tariffs set to take effect from April 2.
• Bilateral Trade Agreement at Risk
  • India and the US are working on a bilateral trade agreement (BTA), with Indian officials seeking relief from tariffs, including the 25% duty on steel and aluminum.
  • Commerce Minister Piyush Goyal is in the US to discuss the issue with United States Trade Representative (USTR) who is overseeing Trump’s tariff policies.
• Concerns Over US Commitment to Trade Deals
  • Trade experts warn that Trump’s tariff decisions, such as the 25% duties on Canada and Mexico, indicate a disregard for WTO norms and existing trade agreements.
  • The imposition of these tariffs raises doubts about America’s adherence to future trade deals, including one with India.
    • The North American Free Trade Agreement (NAFTA), the trade deal between the US, Canada, and Mexico, had been in place since January 1994.
    • However, Trump was dissatisfied with its terms and, during his first term, replaced it with the United States-Mexico-Canada Agreement (USMCA) in 2018-19.
    • Trump’s tariffs on Canada and Mexico violate USMCA and highlight his disregard for negotiated trade agreements.

Farm Sector Vulnerability Amid US Tariff Plans

• India's agricultural sector is highly vulnerable to US reciprocal tariffs due to significant differences in tariff rates between the two countries.
• Farmers’ unions continue to push for a legally guaranteed Minimum Support Price (MSP), adding to the sector’s sensitivity.
• High Tariff Disparity Between India and the US
  • According to an ICRIER report, India imposes an average tariff of 17% compared to 3.3% by the US.
  • The gap is even wider in agriculture, where India’s simple average tariff is 39% and the trade-weighted rate is 65%, while the US maintains much lower rates of 5% and 4%, respectively.

Auto and Pharma Sectors Face Tariff Risks

• India’s automobile and pharmaceutical sectors, among its most successful industries, face potential setbacks due to US reciprocal tariffs.
• With countries demanding greater access to India’s protected markets, these industries may see higher costs and reduced competitiveness in the US.
• Strategies for Indian Industries
  • A GTRI report suggests that Indian firms should explore alternative export markets such as Europe, Southeast Asia, and Africa, where tariff barriers are lower.
  • Additionally, forming joint ventures with American firms or setting up assembly units in the US could help mitigate the impact of tariffs.

US Challenges WTO’s Relevance and Policies

• The US 2025 Trade Policy Agenda, released on March 3, claims that the World Trade Organization (WTO) is losing its relevance and has deviated from its original purpose of promoting open, market-oriented trade.
• The document criticizes the WTO’s Special and Differential Treatment (SDT) provisions, which allow developing countries like India to access benefits such as extended transition periods, higher tariff bindings, and subsidies.
  • It argues that nations can claim SDT status by self-declaring as ‘developing,’ without objective criteria.
• The policy highlights China’s shift away from market-oriented reforms since its 2001 WTO accession.
• It accuses the WTO of failing to address China’s state-led economic practices, which the US sees as incompatible with the organization's founding principles.