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How the US wants a trade crackdown on "all countries," and how India is preparing for Donald Trump's "reciprocal tariffs"

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As former U.S. President Donald Trump campaigns for a potential second term, his aggressive trade policy—particularly the threat of imposing "reciprocal tariffs" on all countries—has raised concerns in India. With the U.S. planning a broader trade crackdown, New Delhi is preparing for potential economic disruptions and recalibrating its trade strategy to safeguard its interests.  

 Understanding Trump’s ‘Reciprocal Tariffs’  

Donald Trump has long advocated for "reciprocal tariffs," meaning that the U.S. would impose the same import duties on a country as that country imposes on American goods. For instance, if India taxes U.S. automobiles at 30%, the U.S. would respond with a 30% tariff on Indian auto imports. Trump argues that this approach ensures "fair trade" and protects American industries.  

During his first term (2017-2021), Trump’s trade policies included tariffs on steel and aluminum, a trade war with China, and the removal of India from the Generalized System of Preferences (GSP), which had allowed duty-free access for thousands of Indian products. If re-elected, Trump has signaled an even tougher stance, potentially affecting India’s exports in sectors like textiles, pharmaceuticals, and engineering goods.  

India’s Vulnerabilities  

India’s trade relationship with the U.S. is crucial—the country is India’s largest trading partner, with bilateral trade exceeding $130 billion in 2022-23. Key exports include gems and jewelry, pharmaceuticals, IT services, and apparel. A reciprocal tariff regime could:  

1. **Increase Costs for Indian Exporters** – Higher U.S. tariffs would make Indian goods less competitive, forcing exporters to either absorb costs or lose market share.  
2. **Impact Key Sectors** – Industries like textiles and engineering, which rely heavily on U.S. demand, could face significant downturns.  
3. **Disrupt Trade Negotiations** – Ongoing talks for a limited trade deal or a broader agreement could stall if tensions escalate.  

 India’s Counter-Strategies  

To mitigate risks, India is exploring multiple approaches:  

 1. Diversifying Export Markets 
   - India is strengthening trade ties with the EU, UAE, Australia, and African nations to reduce dependence on the U.S. The recently signed trade pacts with the UAE and Australia are steps in this direction.  

2. Boosting Domestic Manufacturing  
   - The Production-Linked Incentive (PLI) scheme aims to enhance self-reliance in electronics, pharmaceuticals, and renewable energy, reducing reliance on imports and creating export alternatives.  

 3.Diplomatic Engagement
   - New Delhi is likely to engage in behind-the-scenes negotiations to secure exemptions or phased adjustments, leveraging its strategic partnership with the U.S. in defense and technology.  

4.Retaliatory Measures (If Necessary)  
   - India has previously imposed retaliatory tariffs on U.S. products like almonds and apples. While a full-blown trade war is unlikely, targeted responses could be used as bargaining tools.  

The Bigger Picture  

A Trump-led tariff crackdown would not only affect India but also reshape global trade dynamics. New Delhi’s ability to navigate this challenge will depend on its economic resilience and diplomatic agility. While diversification and domestic reforms offer long-term solutions, short-term disruptions seem inevitable if reciprocal tariffs become a reality.  

As the U.S. election approaches, Indian policymakers and businesses are closely monitoring Trump’s trade rhetoric—preparing for a scenario where protectionism dictates the rules of global commerce.

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