Trump’s ‘Liberation Day’ of tariffs is coming; how is India gearing up for it?

The world and India are gearing up for President Donald Trump's 'Liberation Day' on Wednesday (April 2), the day that he plans to roll out a bunch of tariffs that he promises will free the United States from foreign goods.

The details of Trump's next round of import taxes are still sketchy. But, what exactly does Trump plan to do on 'Liberation Day'?

The US President wants to announce import taxes, including “reciprocal” tariffs that would match the rates charged by other countries and account for other subsidies. Trump has talked about taxing the European Union, South Korea, Brazil and India, among other countries.

Trump, who views tariffs as a means of shielding the domestic economy from unfair global competition and as leverage for negotiating better trade terms for the US, announced 25 per cent auto tariffs last week.

“This is the beginning of Liberation Day in America,” Trump said. “We're going to charge countries for doing business in the US and taking our jobs, wealth... and a lot of things. They've taken so much out of our country, friend and foe. And, frankly, friend has been oftentimes much worse than foe.” In an interview with NBC News, Trump said it did not bother him if tariffs caused vehicle prices to rise because autos with more US content could possibly be more competitively priced.

However, Trump has also suggested that he will be flexible with his tariffs, saying he will treat other nations better than they treated the US.

Reports said Trump could unveil further 'sector-specific' tariffs on Wednesday since he had earlier indicated plans to target pharmaceuticals, semiconductors and lumber. Similarly, a series of reports are due on Tuesday under an "America First Trade Policy" that Trump signed on his inauguration day.

These reports are expected to lead to more trade actions.

Also read: 'Very good relationship with India, only problem it's among highest tariffing nations in the world':

What does India plan to do?

Meanwhile, India is contemplating lowering or even eliminating customs duties on auto parts imported from the US, according to reports quoting government officials. This move is being considered to strengthen trade ties with the US since the customs duties cut is not expected to impact the domestic industry too much.

Unlike China and Canada, who have retailiated with counter tariffs, India is striving to appease the Trump administration and is flexible about slashing tariffs on over half of US imports worth $23 billion, Reuters reported last week.

India has offered to cut tariffs on US farm product imports such as almonds and cranberries as a further concession to the United States, Reuters said, citing two government sources.

Further, during a series of meetings in New Delhi with Brendan Lynch, the assistant US trade representative for South and Central Asia, India said they will cut tariffs on bourbon whiskey and agricultural products such as almonds, walnuts, cranberries, pistachios and lentils.

Also read: India, US officials conclude round of talks on proposed trade pact: Sources

Trade talks between US and India

Moreover, the first trade talks between India and US has ostensibly had “significantly positive outcomes”, said news reports.

This may just help New Delhi to bag some exemptions from Washington’s planned 'Liberation Day' retaliatory tariff action, felt analysts.

The four-day discussions, which began on Wednesday and were extended by a day, led to both sides agreeing on a broad contour for negotiating a bilateral trade agreement (BTA). The commerce ministry confirmed that the two partners discussed increasing market access and reducing tariff and non-tariff barriers.

According to officials, the signs that the outcomes were positive were that the bilateral trade negotiation in New Delhi was extended by one more day. Secondly, the two countries agreed to progress to the next level of talks through virtual mode. Thirdly, India is the only country engaging with the USA to sign a mutually beneficial BTA, while others like China, Canada, Mexico, Germany and the European Union are resorting to retaliation.

Also, Trump made a statement at the White House on Friday that augurs well for India. In the statement, Trump described Prime Minister Narendra Modi as a ‘very smart man’ and his ‘great friend’ while emphasising that tariff talks between the US and India would work out very well, PTI reported on Saturday.

The US and India decided to reach an agreement by September this year, which is in sync with the vision set out by the two countries’ leaders.

What India has done

India has already lowered duties for bourbon whiskey to 100 per cent from 150 per cent last month. Import duties range from 30 per cent to 100 per cent on agricultural products such as cranberries, almonds, walnuts, and around 10 per cent on lentils.

Further, India has done away with the 6 per cent "Google tax" on online ads, which has been a hurdle for global tech companies operating without a physical base in the country. Dropping this tax is seen as a step toward easing trade talks and potentially dodging US tariffs, reported Financial Times.

What Trump is expected to and has done so far

The president plans to tax imported pharmaceutical drugs, copper and lumber. He has put forth a 25 per cent tariff on any country that imports oil from Venezuela, even though the US also does so.

Imports from China are being charged an additional 20 per cent tax because of its role in fentanyl production.

Trump has imposed separate tariffs on goods from Canada and Mexico for the stated reason of stopping drug smuggling and illegal immigration. Trump also expanded his 2018 steel and aluminum tariffs to 25 per cent on all imports.

Some aides suggest the tariffs are tools for negotiation on trade and border security; others say the revenues will help reduce the federal budget deficit. Commerce Secretary Howard Lutnick says they will force other nations to show Trump “respect.”

What can tariffs do to the US economy?

Nothing good, according to most economists. They say the tariffs would get passed on to consumers in the form of higher prices for autos, groceries, housing and others.

Corporate profits could be lower and growth more sluggish. Trump maintains that more companies would open factories to avoid taxes, though that process could take three years or more.

Economist Art Laffer estimates the tariffs on autos, if fully implemented, could increase per vehicle costs by $4,711, though he said he views Trump as a smart and savvy negotiator. Investment bank Goldman Sachs estimates the economy will grow this quarter at an annual rate of just 0.6 per cent.

White House trade adviser Peter Navarro told “Fox News Sunday” that the auto tariffs would raise $100 billion annually and the other tariffs would bring in about $600 billion per year, or about $6 trillion over 10 years. As a share of the economy, that would be the largest tax increase since World War II, according to Jessica Riedl, a senior fellow at the Manhattan Institute.

Treasury Secretary Scott Bessent has suggested that tariffs would be a one-time price adjustment, rather than the start of an inflationary spiral. But his conclusion rests on tariffs being brief or contained, rather than leading other countries to retaliate.

“There is a chance tariffs on goods begin to filter through to the pricing of services,” said Samuel Rines, a strategist at WisdomTree. “Auto parts get move expensive, then auto repair gets more expensive, then auto insurance feels the pressure. While goods are the focus, tariffs could have a longer-term effect on inflation.”

How are other nations thinking about the new tariffs?

Most see the tariffs as destructive for the global economy, even if they are prepared to impose their own countermeasures.

Canadian Prime Minister Mark Carney said Trump's tariff threats had ended the partnership between his country and the US, even as the president on Friday talked about his phone call with Carney in relatively positive terms. Canada already has announced retaliatory tariffs.

French President Emmanuel Macron said the tariffs were “not coherent” and would mean "breaking value chains, creating inflation in the short term and destroying jobs. It's not good for the American economy, nor for the European, Canadian or Mexican economies.” Yet Macron said his nation would defend itself with the goal of dismantling the tariffs.

Mexican President Claudia Sheinbaum has avoided the tit-for-tat responses on tariffs, but she sees it as critical to defend jobs in her country.

The Chinese government said Trump's tariffs would harm the global trading system and would not fix the economic challenges identified by Trump.

Also read: 'Elephant-dragon dance' on Trump tariffs: China calls on India to work together against US

Why Trump calls it 'Liberation Day'

Based off Trump's public statements, April 2 is at least the third “liberation day” that he has identified.

At a rally last year in Nevada, he said the day of the presidential election, November 5, would be “Liberation Day in America”.

He later gave his inauguration the same label, declaring in his address: “For American citizens, January 20, 2025, is Liberation Day.” His repeated designation of the term is a sign of just how much importance Trump places on tariffs.

Trump sees his tariffs as providing national redemption, but the slumping consumer confidence and stock market indicate that much of the public believes the US economy will pay the price for his ambitions.

“I don't see anything positive about Liberation Day," said Phillip Braun, a finance professor at Northwestern University's Kellogg School of Management.

(With agency inputs)