Newly elected US President Donald Trump has announced a “discounted reciprocal tariff” of 26 percent on India. The decision, which was announced earlier today at the White House and is being termed by Trump as “discounted” as its only half of what the countries in question charge the United States of America, has led to a large number of people questions as to what are reciprocal tariffs. “I, DONALD J. TRUMP, President of the United States of America, find that underlying conditions, including a lack of reciprocity in our bilateral trade relationships, disparate tariff rates and non-tariff barriers, and US trading partners’ economic policies that suppress domestic wages and consumption, as indicated by large and persistent annual US goods trade deficits, constitute an unusual and extraordinary threat to the national security and economy of the United States,” said a statement from Trump.
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He further added: “That threat has its source in whole or substantial part outside the United States in the domestic economic policies of key trading partners and structural imbalances in the global trading system. I hereby declare a national emergency with respect to this threat.” Trump stated that large and persistent annual US goods trade deficits have contributed to the decline of the country’s manufacturing base, hindered the expansion of advanced domestic manufacturing, weakened critical supply chains, and made the defense-industrial sector reliant on foreign adversaries. According to Trump, these trade deficits are largely driven by a lack of reciprocity in bilateral trade relationships, where other nations impose higher tariffs and trade barriers on US goods while benefiting from relatively open access to the American market.
What are Reciprocal Tariffs?
Reciprocal tariffs in the US refer to trade policies wherein the US imposes tariffs on imports from a country at the same rate that country applies to American exports. The idea behind reciprocal tariffs is to create a level playing field by matching the import duties imposed by trading partners. This concept has been promoted by various administrations as a way to negotiate fairer trade agreements and counter what is seen as unfair trade practices. It gained attention during the Trump administration, which advocated for reciprocal tariffs to address trade imbalances and reduce barriers for American goods in foreign markets.
According to Trump, the existence of disparate tariff rates and non-tariff barriers has made it more difficult for American manufacturers to compete in foreign markets. He argued that the economic policies of key US trading partners contribute to this imbalance by suppressing domestic wages and consumption, thereby reducing demand for US exports while artificially enhancing the competitiveness of their own goods in global markets. Trump asserted that these conditions have created a national emergency, which the order in question was designed to address and resolve.
“It is the policy of the United States to rebalance global trade flows by imposing an additional ad valorem duty on all imports from all trading partners except as otherwise provided herein. The additional ad valorem duty on all imports from all trading partners shall start at 10 percent and shortly thereafter, the additional ad valorem duty shall increase for trading partners enumerated to this order at the rates set forth to this order. These additional ad valorem duties shall apply until such time as I determine that the underlying conditions described above are satisfied, resolved, or mitigated,” said Trump on the reciprocal tariffs.
What are the Tariffs Levied on India?
Trump has levied a reciprocal tariff of 26 percent on India, which according to him is half the tariff that India levies on the US that its 52 percent. Speaking on the reciprocal tariffs on India, Trump said: “Their Prime Minister just left. He is a great friend of mine, but I said to him that ‘you’re a friend of mine, but you’ve not been treating us right’. India charges us 52 percent, so we will charge them half of that – 26 percent.”
