Impact of Trump’s Tariffs and India’s Efforts to Negotiate a Trade Pact: Analysis of Jaishankar’s Statement

Introduction

On April 9, 2025, as President Donald Trump’s reciprocal tariffs on global imports took effect, India’s External Affairs Minister S. Jaishankar outlined India’s strategic response during a media engagement. While acknowledging that the full impact of the new tariffs remains uncertain, Jaishankar emphasized that India is actively engaged in negotiations with the United States to finalize a bilateral trade agreement (BTA) by fall 2025, which could potentially mitigate the effects of these tariffs on Indo-US trade relations.

Trump’s Tariff Measures: Overview and Impact on India

Tariff Structure and Timeline

The Trump administration has implemented a two-phase tariff increase:

• A universal 10% baseline tariff on imports from all countries, which took effect on April 5, 2025
• Higher “reciprocal” tariffs on specific countries with large trade deficits with the US, including a 26% tariff on Indian imports, which took effect on April 9, 2025 White House

These tariffs were implemented under the International Emergency Economic Powers Act (IEEPA) as part of President Trump’s declared national emergency to address persistent trade deficits with major trading partners White House.

Comparison with Other Countries

While the 26% tariff on Indian goods is significant, it is relatively moderate compared to tariffs imposed on other countries:

• China faces the highest reciprocal tariff at 104%
• The European Union faces tariffs in the range of 20-25%
• Vietnam faces a 45% tariff
• Several other major economies are facing higher rates than India The Hindu

This relative positioning has prompted Indian officials to point out that India may maintain some comparative advantage in certain export categories Reuters.

Economic Impact on India

The new tariffs are projected to significantly affect India’s exports to the US:

• A projected decline of $5.76 billion (6.41%) in India’s merchandise exports to the US in 2025 compared to 2024’s $89.81 billion Times of India
• The most affected sectors include:
  • Gems and jewelry (15.3% decline, approximately $1.82 billion loss)
  • Electronics (12% decline, approximately $1.78 billion loss)
  • Seafood (20.2% decline, approximately $404.3 million loss)
  • Auto parts (12.1% decline, approximately $339.4 million loss)
  • Iron and steel products (18% decline) LiveMint

Some sectors may see modest gains despite the tariffs due to trade diversion from more heavily tariffed countries:

• Knitted garments (projected 3.2% growth)
• Home textiles and made-ups (projected 4.2% growth)
• Tools and cutlery (projected 2.1% growth)
• Kitchenware and footwear (modest gains possible) LiveMint

In response to these economic pressures, the Reserve Bank of India (RBI) has already cut interest rates by 0.25%, citing the uncertainty created by Trump’s tariffs as one of the factors BBC.

Jaishankar’s Statement and India’s Strategy

Key Points from Jaishankar’s Statement

In his first detailed response to the US tariff policy, External Affairs Minister S. Jaishankar made several significant points:

1. The impact remains uncertain: “I don’t think it’s possible to speak about what would be the impact, because we don’t know.” NDTV
2. Engagement strategy: “Our strategy is pretty clear; we decided that we will engage the Trump administration early on this set of issues, and we were very open with them, constructive with them as they were with us.” NDTV
3. Bilateral trade agreement goal: “What we agreed to do was try to negotiate a bilateral trade agreement by the fall of this year.” This refers to concluding a significant trade deal with the US by autumn 2025. The Hindu
4. India’s unique position: Jaishankar highlighted that India is perhaps the only country to reach an understanding with Washington to seal a trade deal since Trump resumed the presidency for his second term. The Hindu
5. Counterstrategy to tariffs: “India’s strategy to counter the US’s damaging tariffs is to finalize a trade agreement with President Donald Trump’s government.” Bloomberg

India-US Trade Negotiations: Current Status

The trade negotiations between India and the US have been advancing rapidly:

1. High-level engagement: Following talks between Prime Minister Narendra Modi and President Trump in Washington DC in February, the two sides announced plans to negotiate the first tranche of the BTA by fall 2025. NDTV
2. Progress in negotiations: Recent talks have focused on reducing tariffs and easing non-tariff barriers. Jaishankar noted that India has had “more talks with Americans in six weeks than in two years with the EU,” highlighting the intensity of the current negotiations. Economic Times
3. Key officials involved: The negotiations are being led by officials from India’s commerce ministry and a US trade delegation headed by Brendan Lynch, Assistant US Trade Representative for South and Central Asia. Other key participants include US Deputy Secretary of State Christopher Landau, Indian Foreign Secretary Vikram Misri, and India’s Trade Minister Piyush Goyal, who has engaged with US Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick. Reuters
4. Next steps: Sector-specific expert engagements for the bilateral trade agreement will begin virtually in the coming weeks, followed by an in-person negotiating round. Reuters

India’s Proposed Concessions and Mitigation Strategy

Potential Trade Deal Elements

India is considering significant concessions to expedite the trade agreement:

1. Tariff reductions: India is open to cutting tariffs on US imports worth $23 billion to mitigate the impact on its exports. Reuters
2. Zero-duty imports: India is willing to consider duty-free imports from the US across various sectors, particularly those under Production-Linked Incentive (PLI) schemes, which include mobile phones, drones, telecom, textiles, automobiles, specialty steel, and pharmaceuticals. Times of India
3. Rules of origin requirements: These duty-free concessions would be subject to strict rules of origin, requiring 30-40% value addition and specific tariff heading modifications. Times of India

No Retaliatory Measures

Unlike some other countries affected by Trump’s tariffs, India has decided not to implement retaliatory measures:

1. Diplomatic approach: India does not plan to retaliate against Trump’s tariff on imports, according to government officials. Reuters
2. Focus on negotiations: Instead of retaliation, India is prioritizing negotiations toward a comprehensive bilateral trade agreement. Business Standard

Market and Sector-Specific Strategies

In addition to pursuing a trade agreement, India is developing sector-specific strategies:

1. Leveraging competitive advantages: India aims to capitalize on its competitive edge in sectors like textiles, apparel, ceramic items, inorganic chemicals, and pharmaceuticals, which may perform better despite the tariffs. Times of India
2. Trade diversion opportunities: In some sectors, India may benefit from trade diversion as Chinese goods face much steeper tariffs (104%). LiveMint
3. Industry adaptation: Indian exporters are looking to adapt by shifting markets and adjusting pricing strategies, though experts note that these adjustments will take time. Times of India

Broader Economic Context

US-India Trade Relations

The tariffs are affecting a significant trading relationship:

1. Trade volume: Bilateral trade between the US and India stood at $129.2 billion in 2024, a record for the partnership. CNN Business
2. Trade deficit: The US has a trade deficit of $46 billion with India. Reuters
3. 2025 year-to-date figures: For the first two months of 2025, US exports to India were $6.7 billion, while imports from India were $16.5 billion. US Census Bureau

Global Market Response

The implementation of Trump’s tariffs has caused significant market volatility:

1. Stock market reactions: Global markets showed significant volatility, with indices experiencing rapid swings. Tokyo’s Nikkei 225 dipped over 5%, while Indian indices Sensex and Nifty declined in line with global market losses. The Hindu
2. Central bank response: The Reserve Bank of India cut interest rates by 0.25% amid concerns over growth risks from the tariffs. BBC

Conclusion

As External Affairs Minister S. Jaishankar stated, the full impact of Trump’s reciprocal tariffs on India is not yet known. However, India has adopted a clear strategy of diplomatic engagement with the US administration, prioritizing the negotiation of a bilateral trade agreement by fall 2025. This approach, which contrasts with the retaliatory measures taken by some other countries, reflects India’s pragmatic assessment that a negotiated solution offers the best path to mitigating the tariffs’ adverse effects on bilateral trade.

The success of this strategy will depend on several factors, including the pace of negotiations, the ability of Indian exporters to adapt to the new tariff environment, and the eventual terms of any bilateral agreement. While certain sectors are projected to experience significant export declines, others may maintain or even improve their competitive position due to India’s relative advantages compared to countries facing higher tariff rates.

As Jaishankar emphasized, India is perhaps unique among affected countries in having reached an understanding with the US to pursue a trade agreement, potentially positioning India to navigate the challenges posed by Trump’s tariff policy more effectively than some of its trading competitors.