Tariff is generally tax imposed by a government on goods and services that are imported from other country.
Why Tariffs Imposed?
Governments impose tariffs for several reasons:
- For revenue generation.
- Raising the price of imported goods, tariffs make domestic products more competitive.
- It can serve as a foreign policy tool, pressuring trading partners to adjust policies.
- Tariffs can address issues like foreign subsidies or dumping, where goods are sold below cost to undercut local markets.
Then What is Reciprocal Tariffs?
Reciprocal tariffs are taxes imposed on imported goods from countries that impose higher tariffs on U.S. export.
Effective
On 2nd April 2025, President of America Donald Trump has announced comprehensive set of tariffs which is termed as reciprocal tariffs.
Focus
- To target countries that impose higher tariffs on US exports.
Trump’s reasoning – “if they tax us, we tax them the same – or more”
Benefits For America
- This policy is part of Trump’s broader “America First” Trade Strategy.
- It is a response to decades of trade deficits and what Trump calls “unfair trade practices” by foreign government.
- He believes this move will revive American industry, bring manufacturing back and protect U.S. jobs.
Tariff Rates As per Industry
- Basic Tariff – All imports into United States will now have to face a minimum 10% tariff, regardless of origin or product type.
- Auto Industry – 25% on all foreign made automobiles and parts, regardless of country.
Country’s Specific Tariffs
India faces 26% Tariff– Previously Trump called India “biggest tariff charger” . Targeted mainly on textiles, pharmaceuticals and IT hardware.
Sectors May Impact For Imposing Tariffs
- Automotive: It may cause major disruption by increasing price, possible production shifts.
- Retail: Higher costs for imported goods, pressure on profit margins
- Technology: It will make electronics costlier, chips and components from Asia more expensive, increasing production costs for tech companies and potentially raising prices for consumers.
- Construction: Steel and aluminum price will hike which may affect housing and infrastructure costs, which can lead to higher construction prices or project delays.
Conclusion
Trump’s reciprocal tariffs mark a significant shift in U.S. trade policy, aiming to counter high foreign duties.
India’s exports, particularly in key sectors, may face challenges due to the 26% tariff.
The move could escalate trade tensions, prompting renegotiations or policy adjustments.