India Prepares For Potential US Tariff Hike With WTO-Compliant Strategies And Trade Tweaks

India has initiated a comprehensive sector-wise analysis to assess potential impacts and prepare for possible tariff hikes on exports to the United States (US) under the Donald Trump administration, Economic Times reported citing sources.

"Ministries and departments are examining various scenarios, apprehending such a move by the US and possible remedies," said one of the individuals familiar with the matter.

President-elect Trump recently stated that the US plans to impose reciprocal tariffs on Indian goods, citing New Delhi’s high tariffs on American imports.

Experts suggest India could consider revising import duties on specific products or increasing market access for US goods to address these concerns.

Officials, however argue that India's most-favoured nation (MFN)-weighted average import tariff is relatively low, at about 5-6 per cent, with select agricultural products facing higher tariffs.

Even so, these tariffs remain significantly lower than those bound under the World Trade Organization (WTO) agreements. Officials also noted that the US itself imposes high tariffs on agricultural products, such as dairy, fruits, cereals, and oils, with rates as high as 130-190 per cent.

Experts have suggested strategic responses, including the possibility of retaliatory tariffs or escalating the matter to the WTO. 

"There is no harm in relooking at some of the products on which India can tweak tariffs to address the concerns of the US," said an expert, requesting anonymity due to the sensitivity of the issue.

While tariffs are linked to WTO commitments or MFN principles and cannot be country-specific, a calibrated approach can still be explored for products traded between India and the US.

"It is not possible for India to have country-specific tariffs because it violates the most-favoured nation (MFN) principle," said Ajay Sahai, director general of the Federation of Indian Export Organisations (FIEO).

Also Read: Wall Street Slides As US Central Bank Lowers Key Interest Rate By 0.25 Per Cent, Reduces 2025 Cut Outlook