The deliberations about reciprocal tariff is gaining momentum. Even as US President Donald Trump announced reciprocal tariff from April 2 and criticised India’s high tariff, the exact extent of the implications need to be assessed. In a report by ICICI Securities, analysts have compared the difference between the tariff levied by US on India and what India levies on the US.According to them, “If tariffs are increased more on other countries than India, it would actually benefit the country in gaining share in US market.”
How India could benefit from reciprocal tariff?
One of the most important impacts of the higher tariffs will be the impact on local consumers in the US. They will see the “largest impact given US imports of goods worth $3.3 trillion (11.2% of GDP),” stated the report by ICICI Securities.
Then comes the reciprocity of tariff. In fact, the reciprocal tariff is a key change in strategy under President Trump’s second term. This is imposed on countries that have higher tariffs on US goods than what the US imposes on imports. In case of India, the weighted tariff differential is 6.5% with a much higher differential in case of food products, footwear, garments, vehicles and consumer goods. Essentially this means while the tariff imposed by the US on India is 3% while India imposes 9.5%. As per calculations by ICICI Securitie, even a 5% tariff “would have a $6-7 billion impact, all else being equal.”
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How does India’s tariff on US compare Vs global peers
A comparison globally indicates that, South Korea imposes the highest tax of 14.4 % on US goods while in reciprocity, US imposes as low as 1.8 %. Similarly, when we look at other Asian countries, the tax imposed by China is 7.1% on US goods while the US imposes only 2.9%. Japan imposes 4.8% while the US imposes around 1.7%. At the same time, Brazil which is part of South America imposes 4.7% and the US imposes almost half which is 2.3%. However, there is not much difference between the reciprocal tax figures imposed by Canada and the US. Canada imposes 3.1% and the US imposes 2 %. The report by ICICI Securities, there added that, “If tariffs are increased more in other countries than India,
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