New Delhi, March 1: Arvind Panagariya, Chairman of India's 16th Finance Commission, said on Saturday that India's looming threat of reciprocal tariffs from the United States could be positively leveraged through mutual tariff reductions, potentially creating a win-win situation for both nations.
Speaking at the 49th Civil Accounts Day, Panagariya emphasized that reciprocal tariff threats from the US can be advantageous if India effectively negotiates tariff reductions, thereby enhancing market access for Indian exports. He highlighted sectors such as textiles and clothing, which stand to gain significantly from increased access to the US market.
Panagariya, however, warned against the risk of escalating into a tariff war. He explained that if India and the US engage in reciprocal tariff impositions, the consequences would be "unfortunate" and detrimental to both sides.
"We have a very good opportunity to do a win-win bargain. Now that the reciprocal tariff threat is coming, it is doubly beneficial that we also, in the process, hold the United States to reciprocal tariff reductions as well, and get access for our goods that we export to them," Panagariya said.
US Tariff Plans and Past Trade Tensions
US President Donald Trump has repeatedly signaled intentions to impose reciprocal tariffs on Indian exports, accusing India of being a "tariff king" and "tariff abuser." The US has already announced a 25% tariff on steel and aluminum, effective from March 12, directly impacting India's exports in these sectors.This tariff scenario echoes previous tensions from 2018 when the US imposed tariffs on certain steel and aluminum products. India responded in 2019 with retaliatory tariffs on 29 US products, including apples.
Trade Relations and Potential for Growth
Recent trade developments underscore the growing significance of US-India bilateral trade relations. During Prime Minister Narendra Modi's recent visit to Washington, both countries pledged to more than double their bilateral commerce to USD 500 billion by 2030. They also agreed to negotiate the first tranche of a multi-sector Bilateral Trade Agreement (BTA) by the fall of 2025.In 2023, the bilateral trade between India and the US reached USD 190.08 billion, comprising USD 123.89 billion in goods and USD 66.19 billion in services. India's merchandise exports to the US totaled USD 83.77 billion, with imports from the US at USD 40.12 billion, resulting in a merchandise trade surplus of USD 43.65 billion in India's favor.
India also held a surplus of USD 6.47 billion in services trade, exporting USD 36.33 billion in services to the US while importing USD 29.86 billion in services.
Overall, from 2021 to 2024, the US has remained India's largest trading partner, with a consistent trade surplus in India's favor. Specifically, in the fiscal year 2023-24, the bilateral trade in goods amounted to USD 119.71 billion, with exports from India valued at USD 77.51 billion and imports from the US at USD 42.19 billion, creating a surplus of USD 35.31 billion.
