Countdown to April 2: How Much India Could Lose in Exports if Trump’s Tariff Plan Strikes

As we stand less than a week away from US President Donald Trump's so-called 'liberation day' on April 2, global markets are on edge, anxiously awaiting how these tariff threats will share trade and the economy. India, which enjoys a trade surplus with the US, is no exception.

Trump, who believes that the US has been ripped off by almost every country in the world, also hinted that there would be some “flexibility” in his plan to impose blanket tariffs on most trading partners. This could have brought some relaxation to the market ridden by anxiety. However, Bloomberg reported citing Trump’s allies, the next wave of tariffs is expected to be more targeted and precise than his earlier, sporadic threats.

"Only countries that don't have tariffs on the US, and with whom the US has a trade surplus, will not be tariffed under the reciprocal plan," an official told the international news agency.

The worst part of Trump's plans? As long as the President himself does not make an announcement and finalise the plan, the fluidity in the situation persists. Even standing this close to the deadline could not give a clear picture of the countries that will face the tariff wrath next week. However, India has been in Trump’s crosshairs for a while now, frequently being labeled as a “tariff abuser”.

India’s Tightrope Walk with the US

So far, India has been treading carefully and has shown signs of cooperation with its “friend” Trump, as dubbed by Prime Minister Narendra Modi in a congratulatory message to Trump on his victory in November last year. In fact, Modi was one of the few first leaders to visit Washington DC, this year.

India has reasons to safeguard its ties with the US. The country exported goods worth over $87bn, including pharmaceuticals and textiles, to the US in 2024. India's exports outweighed its imports of American goods by nearly $46bn during the same period, marking a 5% year-on-year growth.

Both nations have set an audacious goal of expanding bilateral trade to $500bn per year by 2030.

To ease tensions, India lowered some tariffs on American goods in February. It has especially picked products that Trump has criticised, including Harley-Davidson motorcycles and bourbon whiskey. Earlier this month, Commerce and Industry Minister Piyush Goyal suggested that exporters should shed some protectionism, hinting at the government's willingness to bring the tariff barriers further down in the face of escalating tariff concerns.

"Reflecting on the reciprocal tariffs, he [Goyal] has cautioned the EPCs to come out of their protectionist mindset and encouraged them to be bold and ready to deal with the world from a position of strength and self-confidence," said an official statement from the ministry on March 13.

Finance Minister Nirmala Sitharaman told parliament this week that India will further exempt import duty on 35 items used in EV battery manufacturing and 28 items used in mobile phone production.

How Much Will It Cost India?

Since the Trump administration has not cleared the air on the nature of the reciprocal tariffs—at a country, sector or product level—it is hard to predict an exact fallout number.

If the US imposes broad country-level tariffs, Emkay Global estimated that India would potentially lose $6bn in exports to the US at 10% tariffs. "It will rise to $31bn at 25% tariffs," it added.

The latest edition of the Monthly Economic Review released by the Department of Economic Affairs highlighted that "tariff-related developments in multiple countries have heightened trade-related risks, affecting investment and trade flows globally," which have already softened India’s export growth thus far in FY25.

Reuters reported, citing government sources, that reciprocal tariffs estimated to hit 87% of India's total exports, valued at approximately $66bn. To counterbalance, India is looking at tariff reductions on 55% of the US goods worth $23bn it imports to the country that are now subject to tariffs ranging between 5% and 30%.

Traditionally, India's high tariffs, along with subsidies, have protected domestic giants from competition while attracting foreign investment. Lowering these tariff walls might open up new opportunities, but whether this shift will work in India's favor remains to be seen. For now, we can only wait and watch.