India announced on Thursday that it is closely analyzing the consequences of a newly imposed 27% tariff by the United States on its imports, while affirming its intention to pursue a trade agreement with Washington this year. The move marks a measured response from New Delhi despite its failure to secure relief from President Donald Trump’s aggressive trade strategy.
India’s reaction came shortly after President Trump revealed the steep tariff hikes, which added further pressure on an already weakened global economy, triggering significant declines in international stock markets and oil prices.
While Trump publicly mentioned a 26% tariff on Indian goods, the actual figure in the White House executive order was 27%, a number also confirmed by India’s trade ministry, which cited the official order for its calculations.
The tariff strategy involves a preliminary 10% baseline duty starting Saturday, followed by the full 27% rate kicking in from April 9. In a statement, India’s trade ministry said it is “carefully examining the implications” of the new tariffs and is also consulting with domestic industries and exporters to understand how the new measures might impact them.
In the same statement, the ministry noted that “The department is also studying the opportunities that may arise due to this new development in U.S. trade policy,” referring to how the changes could open doors in other sectors or markets. It also pointed out the ongoing dialogue between Prime Minister Narendra Modi and President Trump. “The ongoing talks are focused on enabling both nations to grow trade, investments and technology transfers,” the ministry stated. “We remain in touch with the Trump administration on these issues and expect to take them forward in the coming days.”
This development is part of a broader move by the Trump administration to ramp up duties on a number of countries. For instance, China has been hit with a 34% tariff in addition to a previously announced 20% tax, while Vietnam faces a 46% duty.
Compared to these, the comparatively lighter tariff on Indian goods appeared to ease investor concerns, resulting in smaller losses on Indian stock markets than in the rest of Asia. India’s two key stock indices, the Nifty 50 and the BSE Sensex, each dropped just 0.3% at market open. In contrast, other major Asian markets experienced sharper losses ranging from 1.5% to 3%. The Indian rupee initially weakened by 0.3% to 85.75 per US dollar but later rebounded to 85.45.
The Global Trade Research Institute noted that India could gain a natural edge in several important sectors thanks to the lower tariff relative to other nations. However, nearly $14 billion worth of electronics and more than $9 billion in gems and jewelry exports from India are expected to feel the sting of the new US import duty.
In a positive development for India, pharmaceutical exports were spared from the tariff hike, which was welcomed by the country’s drug industry. The United States accounts for nearly one-third of India’s pharmaceutical exports, valued at around $9 billion last fiscal year, mostly consisting of generic versions of widely-used medications.
This exemption had an immediate impact on the stock market. Shares of Indian pharmaceutical companies surged nearly 5% during early trading on Thursday, diverging from the overall decline in the broader market.
India’s main industry groups, including the Associated Chambers of Commerce and Industry (Assocham) and the Federation of Indian Export Organisations (FIEO), indicated that the country’s export competitiveness would be less affected than that of major rivals due to its positioning within the middle range of the new US tariff regime.
The Trump administration justified the 27% tariff on Indian goods by citing both tariff and non-tariff barriers, including currency manipulation. According to a White House statement, the tariffs will remain in place until the administration determines that “the threat posed by the trade deficit and underlying non-reciprocal treatment is satisfied, resolved, or mitigated.”
At present, the United States has a $46 billion trade deficit with India. The newly announced tariffs increase pressure on Prime Minister Modi, who has previously positioned himself as a close ally of Trump, to find a diplomatic solution to ease or remove the new trade restrictions.
Just a week before the tariffs were unveiled, Reuters had reported that New Delhi was open to reducing tariffs on $23 billion worth of American imports. This move would be aimed at reducing the damage to India’s own exports in sectors like pharmaceuticals, auto parts, and gems and jewelry.
In an effort to win favor with the Trump administration, India has already taken several steps. These include lowering duties on luxury motorcycles and bourbon whiskey and eliminating a digital services tax that had affected major American tech firms.
Prior to the reciprocal tariff announcement, the United States’ average tariff rate was just 3.3%, in contrast to India’s significantly higher average rate of 17%, according to the White House.
Ajay Sahai, Director General of the Federation of Indian Export Organisations, pointed out that India’s new tariff burden was still lower than those faced by competitors such as Vietnam and Bangladesh. “This could help Indian apparel and footwear sectors,” he noted, suggesting that Indian exporters in those areas might benefit from a shift in global demand as buyers look to avoid higher tariffs on other nations.
Despite the challenges posed by the new tariff, India’s strategic and measured response highlights its intent to maintain stable trade relations with the United States. The ongoing negotiations and India’s willingness to make tariff concessions indicate a broader effort to secure a comprehensive trade agreement with Washington.
While tensions in global trade continue to mount due to Washington’s increasingly protectionist stance, India appears to be positioning itself as a stable and willing partner open to negotiation. The diplomatic tone adopted by New Delhi suggests that, even amid setbacks, it sees the long-term benefit of a trade partnership with the U.S.
As the April 9 deadline for full implementation of the 27% tariff approaches, the outcome of ongoing discussions between the two nations will be closely watched by global markets and industry leaders. India’s blend of strategic cooperation and domestic preparation reflects its broader goal of safeguarding its exports while pursuing new opportunities amid shifting global trade dynamics.