By Saurabh Shukla
New Delhi: On Wednesday, US President Donald Trump announced a major new tariff policy designed to reduce the US trade deficit and boost domestic manufacturing.
The plan includes a universal 10% tariff on all imported goods, effective April 5, 2025. It will be replaced by the country-specific tariffs taking effect on April 9. Over 60 countries are affected by the measures.
While Trump declared a 26 per cent "discounted" reciprocal tariff on India, experts claim that the imposition of higher reciprocal tariffs by the US on several other Asian countries, including China, Vietnam, Taiwan, Thailand and Bangladesh, presents an opportunity for India to strengthen its position in global trade and manufacturing.
However, gains will not accrue automatically as India needs deep reforms to enable scale production, domestic value addition, and improve competitiveness to benefit, they said.
According to a report prepared by Global Trade Research Initiative (GTRI), certain goods are exempt from these baseline and country-specific tariffs. These include aluminum, steel, and auto products already subject to a 25% tariff under Section 232; critical items such as pharmaceuticals, semiconductors, copper, and energy products; and imports from Canada and Mexico that qualify under the United States-Mexico-Canada Agreement (USMCA). Additionally, goods with at least 20% US content will only be taxed on the portion not produced in the US.
Founder of GTRI, Ajay Srivastava, said that there are also border-specific provisions. Goods from Canada and Mexico that do not meet USMCA qualifications will face a 25% tariff, while Canadian energy products and potash not covered under the USMCA will be subject to a 10% tariff. For small shipments, the existing de minimis exemption for goods valued under $800 will remain in place temporarily. However, this exemption will be removed once systems are in place to collect tariffs on such imports. In addition, the new tariffs will apply equally to goods from Hong Kong and Macau, as part of efforts to prevent tariff evasion through transshipment from China.
Calculations of Tariffs
Under the new US trade policy, how much a country pays in tariffs will depend on the type of goods being exported and their origin. Some goods will face zero tariffs, including essential and strategic items such as pharmaceuticals, semiconductors, copper, and energy products like oil, gas, coal, and LNG. Also exempt are goods from Canada and Mexico that qualify under the USMCA trade agreement, products that have at least 20 percent US-made content (only the non-US portion will be taxed), and low-value shipments under $800, which mainly covers e-commerce orders. These items can continue to enter the U.S. without any additional tariff burden.
Also, there is a 25 percent tariff on key industrial sectors, including aluminum, steel, automobiles, and auto parts. This tariff applies broadly to most countries and is aimed at protecting and rebuilding critical US manufacturing capabilities. For most other goods, there is now a two-layered tariff system. All imports are first subject to a 10 percent baseline tariff starting April 5, 2025. Then, beginning April 9, 2025, certain countries will face country-specific tariffs. Country-specific tariffs will replace baseline tariffs.
For example, starting April 9, goods from India could be subject to tariffs as high as 27 percent in total. However, goods such as pharmaceuticals, semiconductors, copper, and energy products remain exempt from any new tariffs.
Overall, the new policy imposes heavier duties on imports to rebalance trade, promote US manufacturing, and reduce reliance on foreign supply chains. The actual tariff a country faces depends on what it's exporting and how its trade practices align with US economic and national security interests.
Impact on Items
Goods from India face a 25% tariff on steel, aluminium, and auto-related goods, and no tariffs on pharmaceuticals, semiconductors, copper, or energy products. For the remaining products, India is subject to a reciprocal tariff of 27%. China faces a 25% tariff on steel, aluminium, autos, and auto parts. There are no tariffs on pharmaceuticals, semiconductors, copper, or energy products. For the remaining products, the US applies a reciprocal tariff of 34%, with an additional 20% already announced by the US. The total US tariffs on such goods from China amount to 54%.
Country-specific Reciprocal Tariffs
No tariffs were imposed on Ireland, despite a trade deficit of $89.2 billion in 2024, or on Russia, Guyana, and Romania, despite each exceeding $1 billion in deficits. Some nations with US trade surpluses, including Australia (+$13.7 billion) and the United Arab Emirates (+$12.6 billion), were still hit with the 10% base tariff. Others include Argentina, Peru, Morocco, Guatemala, Honduras, El Salvador, and the Dominican Republic.
What US Says?
According to a Fact Sheet shared by the White House, President Trump has declared a national emergency to enhance the country's competitive edge, protect its sovereignty, and strengthen national and economic security. It says that Trump is focused on leveling the playing field for American businesses and workers by addressing unfair tariff disparities and non-tariff barriers imposed by other nations.
It reads: For generations, countries have taken advantage of the United States, tariffing us at higher rates. For example:
The United States imposes a 2.5% tariff on passenger vehicle imports (with internal combustion engines), while the European Union (10%) and India (70%) impose much higher duties on the same product.
For networking switches and routers, the United States imposes a 0% tariff, but India (10-20%) levies higher rates.
Brazil (18%) and Indonesia (30%) impose a higher tariff on ethanol than does the United States (2.5%).
For rice in the husk, the U.S. imposes a tariff of 2.7%, while India (80%), Malaysia (40%), and Turkey (31%) impose higher rates.
Apples enter the United States duty-free, but not so in Turkey (60.3%) and India (50%).
The United States has one of the lowest simple average most-favored-nation (MFN) tariff rates in the world at 3.3%, while many of our key trading partners like Brazil (11.2%), China (7.5%), the European Union (5%), India (17%), and Vietnam (9.4%) have simple average MFN tariff rates that are significantly higher.
Similarly, non-tariff barriers—meant to limit the quantity of imports/exports and protect domestic industries—also deprive U.S. manufacturers of reciprocal access to markets around the world. For example:
China’s non-market policies and practices have given China global dominance in key manufacturing industries, decimating U.S. industry. Between 2001 and 2018, these practices contributed to the loss of 3.7 million U.S. jobs due to the growth of the U.S.-China trade deficit, displacing workers and undermining American competitiveness while threatening U.S. economic and national security by increasing our reliance on foreign-controlled supply chains for critical industries as well as everyday goods.
India imposes their own uniquely burdensome and/or duplicative testing and certification requirements in sectors such as chemicals, telecom products, and medical devices that make it difficult or costly for American companies to sell their products in India. If these barriers were removed, it is estimated that U.S. exports would increase by at least $5.3 billion annually.
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