TRUMP’S TARIFF ACTIONS:
• Tariffs are the substance of laws and regulations formulated after highly rigorous trade negotiations.
• The binding tariffs through commitment schedules in trade agreements provides essential certainty and predictability for businesses engaged in cross-border trade.
• The US announced sweeping tariff hikes on April 2, 2025, under Trump’s new trade policy, directly impacts India’s exports to its largest trading partner with bilateral trade of $131.84 billion.
• Disregard for rules of trade:
⇒ Ranged from 10% to 135%, targeting over 100 countries It also extended to the barren Arctic marine reserves of Heard and McDonald Islands, uninhabited by humans, just highlighted the irony of a bizarre executive order.
⇒ Undermines WTO rules: certainty & predictability essential to global trade, which are protected via binding commitments under WTO rules.
US CIT VERDICT: JUDICIAL REBUTTAL
• The U.S. Court of International Trade (CIT) ruled the tariffs unlawful, stating that a blanket invocation of "national emergency" cannot justify overriding trade law and constitutional processes.
• Constitutional Overreach:
⇒ Such actions sidestepped legislative & judicial overreach threatening principle of separation of powers in the US democratic framework.
• Limited Immediate Impact:
⇒ Despite the strong ruling, a stay by an appeals court means the tariffs continue for now.
HISTORY OF INDIA-US TARIFF RELATIONS
• The US has historically employed various trade mechanisms to impose tariffs on Indian goods.
• Section 301 of the Trade Act of 1974: Enables the US to investigate and impose tariffs in response to unfair trade practices.
• Section 232 of the Trade Expansion Act of 1962: Allows the imposition of tariffs on national security grounds.
• Generalized System of Preferences (GSP) Revocation: In 2019, the US revoked India’s GSP status, eliminating duty-free benefits for many Indian exports.
TRADE DEFICIT MYTH
• Trump administration’s justification: global trade deficits is a “national emergency.”
⇒ Trade deficit occurs when imports exceed exports, and it demonstrates the availability of consumer wealth to purchase imported goods.
• Flawed Analysis:
⇒ Deficits merely reflect high consumer demand, not necessarily economic harm.
⇒ US ignored exports of services & arms trade in its calculations.
• India-US Trade Reality:
⇒ the U.S. has cited the $44.4 billion trade deficit with India
- However, it does not consider trade in services (which includes digital services, financial services, education) and arms trade.
⇒ the actual balance (after services and arms) results in a $35–$40 billion surplus in favor of the U.S. (Global Trade Research Initiative)
INDIA’S POSITION IN THE CROSSFIRE
• Target of tariff hikes
⇒ Rising tariffs.
- US: doubled tariffs on Indian steel (50%) & aluminium (50%) even after 2023 mutually agreed WTO Settlement.
⇒ No immunity for India:
- Despite cooperation, India continues to face tariff hikes.
- Reflects Trump’s transactional & unpredictable policy.
• WTO Complaints & US Disregard
⇒ 2022 WTO Panel Ruling:
- WTO declared Trump’s original tariffs as unjustified.
- India had filed its own complaint but later withdrew if in favour of bilateral negotiations.
⇒ Lack of Reciprocity: US continues to resist India’s WTO retaliation efforts, limiting India’s legal leverage.
LIMITATIONS FOR INDIA: ILLUSION OF STRATEGIC ADVANTAGE
• China Truce Weakens India’s Hand:
⇒ US - China trade détente undermines India’s strategic advantage.
• Apple Tariff Threat:
⇒ Trump administration threatened tariffs on Apple manufactured in India
⇒ Shows fragile nature of commercial goodwill.
• Security Doubts:
⇒ Trump’s transactional approach suggests no assured US support in military conflict with China.
• Higher costs for Indian exporters:
⇒ The increased tariff burden may force Indian businesses to seek alternative markets or restructure pricing strategies to maintain competitiveness.
• Decline in trade volume:
⇒ India’s key sectors, such as pharmaceuticals and IT, which heavily rely on US exports, may experience reduced demand.
WAY FORWARD FOR INDIA
• Key Objectives for Balanced Trade Deal
⇒ Removal of additional tariffs on Indian steel, aluminium & other goods.
⇒ Protection from retaliatory tariffs on US investments in India, e.g., Apple.
⇒ Exemption from One Big Beautiful Bill (OBBB): 3.5% Remittance Tax on Indian citizens.
⇒ Assurance on non-retaliation for India’s digital services taxes.
⇒ Visa reforms, especially related to H1B visa & services trade.
• Trade in Services & Data Regulation
⇒ Including:
- Cross-border data flow frameworks.
- Digital sovereignty protection.
- Clear rules for export of services.
• Multilateralism: Strategic Anchor
⇒ WTO Framework: Still critical for India.
- WTO rules provide institutional safeguards for countries like India.
⇒ G-20 Commitments: During presidency, India endorsed multilateral trade frameworks.
- Must now translate into concrete global diplomacy.
CONCLUSION
A recent report by the Global Trade Research Initiative (GTRI), suggests that Indian businesses should consider diversifying their export markets to regions such as Europe, Southeast Asia, and Africa, where tariff barriers are comparatively lower. Additionally, forming joint ventures with U.S. companies or establishing assembly units within the United States could serve as strategic measures to mitigate the impact of high tariffs.