India among top 6 target slabs as Trump unleashes tariff tsunami

US President Donald Trump’s decision to impose a 25 per cent tariff on Indian goods, which is higher than the rates determined for Pakistan, Bangladesh or Indonesia, has placed the world’s fourth-largest economy among the higher-end recipients of his “reciprocal” tariffs.

On Thursday, July 31, the US President signed an executive order imposing steep tariffs on imports from over 70 nations to correct what he calls "imbalances in trade practices". The new rates range from 10 per cent to 41 per cent, with India on the sixth highest slab along with Tunisia, Moldova, Kazakhstan and Brunei

Also read: Higher tariffs to impact US more than India: SBI Research

New Delhi faced Trump’s wrath for having "military and energy ties with Russia", and for its "high" trade barriers.

Making trade more 'reciprocal'

While the Indian market has felt an initial shock and experts have raised concerns over the repercussions on the tariffs and the future of the two countries’ trade negotiations, Trump has said that these measures are aimed at making trade “more reciprocal over time and to address the national emergency caused by the massive US goods trade deficit”.

He has described the tariffs as “kind reciprocal” — applying rates at “half the level” the US believes other countries impose on its goods. In his own words: “We’re giving them a bargain.”

As far as Pakistan is concerned, its exports have been hit with a 19 per cent tariff, following a bilateral trade deal involving energy cooperation.

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Similarly, Indonesia secured its own arrangements and is also subject to a 19 per cent rate—significantly lower than that of India.

Other nations with bilateral trade deals with the US—including Japan, South Korea, the UK and the European Union—face tariffs in the 10-15 per cent range, while countries without deals may be slapped with up to 41–50 per cent rates. It may be noted that India has been in talks with the US for a bilateral trade deal. Talks are on hold for now, and likely to resume next month.

Trump’s logic

The Trump administration has adopted a formula based on bilateral trade deficits with countries: The tariff rate is calculated as a simplified ratio of the US goods trade deficit with a country divided by that country’s exports to the US, then reduced by half. The administration claims the aim is to “drive bilateral trade deficits to zero”.

Also read: Trump tariff shocker leaves Indian stocks, exporters scrambling

The president himself framed this as a way to restore the US’s economic independence offering foreign countries a “discount” from what they supposedly charge the US.

Economic analysts have questioned the formula’s validity, noting it often overshoots actual foreign tariffs and uses trade deficits as a flawed proxy for unfair barriers

The Economist, for instance, described the methodology as “overly simplistic”, while UBS estimated the reciprocal tariffs would raise modest revenue—around $18–32 billion annually, roughly 0.1 per cent of the US GDP.

Also read: Trump imposes new reciprocal tariffs on over 70 nations; Syria, Canada, Brazil face steep taxes

Indian media and economists warn that a 25 per cent tariff rate could significantly impact sectors such as pharmaceuticals, automotive, machinery and pearls, since those sectors account for around 87 per cent of India’s exports to the US. Citi Research projected potential losses to India of around $7 billion per year.

On Pakistan, analysts said while initially hit by a 29 per cent tariff, it has managed to negotiate a comparatively lower 19 per cent rate, giving its exporters a partial cushion even against regional competitors such as Bangladesh and Vietnam.