ISLAMABAD: US-India trade ties may take a nosedive, as US President Donald Trump directly told Indian Prime Minister Narendra Modi to either reduce tariffs or face reciprocal trade barriers, similar to those imposed on American traders in India.
Hours before his meeting with the Indian prime minister at White House, Trump introduced what he called Reciprocal Tariff Policy for trading partners on Thursday, potentially escalating trade tensions and fueling inflation.
However, he provided no further details about the plan, which could target any country that imposes duties on the US imports.
Since taking office, Trump has imposed a range of tariffs on some of the United States’ largest trading partners, arguing that such measures help counter unfair trade practices. He has used tariffs as a tool to generate revenue, address trade imbalances, and pressure countries to meet US demands.
Asked before the meeting about the steps India was taking, India’s Foreign Secretary Vikram Misri told a journalist that it was a “gift” for Trump designed to lower trade tensions.
A Trump aide said that the president sees defence and energy sales to India lowering the US trade deficit.
India’s energy purchases from the US could go up to $25 billion soon from $15 billion last year, India’s Misri said, adding that this could contribute to reducing the trade deficit.
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Tariffs will continue to dominate the two countries’ relationship, said Richard Rossow, head of the India program at the Center for Strategic and International Studies, a think tank.
“It’s going to be a boxing match,” he said. “India is willing to take a few hits, but there’s a limit.”
The US has a $45.6 billion trade deficit with India. Overall, the US trade-weighted average tariff rate has been about 2.2 percent, according to World Trade Organization data, compared with India’s 12 percent.
The US trade deficit has been the main reason for President Trump’s tariff tirade. According to the Economic Indicators Division of the US Census Bureau, the US balance of trade has stood at a deficit of at least $500bn since 2017. That is why perhaps President Donald Trump has put global leaders ill at ease with his threat of tariffs.
Dr Nadeemul Haq, a prominent economist and former deputy chairman of the Planning Commission of Pakistan, is of the view that Trump’s Reciprocal Tariff Policy would not have much of an impact on the international trade and consumers.
Finding the policy as a “good thing” he said “it would just have an announcement effect on trade and inflation if at all. I don’t think he would impose tariffs as much as he has been announcing unequivocally.
Talking to WE News English Dr Haq said, “Trump is just trying to pressure the countries including India that impose high tariffs on the American products.”
Unlike most international analysts who fear high US tariffs would fuel inflation, Dr Haq says it would not be a longer-term policy and would not have inflationary repercussions.
Asked about $500 billion US trade deficit for which the analysts believe Trump was imposing reciprocal tariffs, he said, “it is not much of a problem for the US that easily balances it off with the dollar dominance in the international trade. They [Americans] would have to lower the dollar strength if they want to reduce the trade deficit.”
President Trump on trade with India: “India’s been, to us, just about the highest tariff nation anywhere in the world… it’s very hard to sell into India… We’re going to have the same. Whatever India is charging us, we’re charging them.” pic.twitter.com/20ZEEJKeEu
— Rapid Response 47 (@RapidResponse47) February 13, 2025
Given the negligible bilateral trade volume with the US, he said Pakistan would not have any significant impact of the reciprocal tariff policy. He admits that tariffs in Pakistan were also high that is why, for instance, American vehicles are not popular here. Since US is the top importer of Pakistani exports.
Dr Haq observes, “our textile, leather and IT services exports may face problems in case the Trump administration actually imposes reciprocal tariffs.”
ALSO READ: Modi Trying to Appease Trump to Avoid US Tariffs
After announcing and then delaying tariffs on Canada and Mexico, hitting Chinese goods with an additional 10 per cent tariff and threatening the European Union, countries and markets are concerned about where the US president will go next.
Trump’s policies come at a time when the US operates a large negative trade balance with the rest of the world. This happens when a country buys or imports more from other countries than it sells or exports to them.
In 2024, the US operated a trade deficit in goods of more than $1.2tn with the rest of the world but operated a surplus of nearly $300bn in services, according to US International Trade Agency.
