US new policies and impacts on INDIA

Trade Tariffs and Economic Implications

The US has announced 27 percent reciprocal tariffs or import duties on Indian goods which will enter American markets.

In April 2025, President Trump announced a 27% reciprocal tariff on Indian imports, aiming to address trade imbalances and promote domestic manufacturing. This tariff is higher than those imposed on some U.S. allies but lower than the 54% tariff on Chinese goods.

Trump branded India “very, very tough” for imposing 52 per cent tariffs and retaliated with a 26 per cent “reciprocal tariff” as a direct response. A 10 per cent tariff on imports will be imposed from April 5 and extra duties on countries he claims “cheated” America from April 9.

What are tariffs?

These are customs or import duties imposed on the import of goods. The importer has to pay this duty to the government. Normally, companies pass on these taxes to end users.

What are reciprocal tariffs?

They are imposed by countries to counter increases in duties or high tariffs by trading partners — a kind of tit-for-tat tax.

 India faces a setback despite concessions to Trump on trade and immigration. New tariffs will affect electronics, gems, and textiles.

Why has the US announced these tariffs?

According to America, these taxes will help boost domestic manufacturing in the US and cut the trade deficit. The US is facing huge trade imbalances with countries, especially with China. With India, the US has a trade deficit of USD 35.31 billion in goods in 2023-24

We are analyzing the impact. It is a mixed bag. There is a provision that if a country would address the concerns of the US, the Trump administration can consider reducing the duties against that nation,” said an official.

This gives India an edge above the others as it is already in talks for a Bilateral Trade Agreement (BTA) with the US and aim to conclude its the first tranche by Fall this year.

Immigration Policy Reforms

The Trump administration is considering significant changes to immigration policies that could affect Indian nationals. Proposals include revoking birthright citizenship and employment authorization documents for H-4 visa holders, which would directly impact families of H-1B visa professionals, predominantly from India.

The anticipated restrictions on H-1B and L-1 visas under a Trump presidency are expected to disproportionately impact Indian IT professionals. They constitute a large fraction of these visa holders. By tightening eligibility criteria, the administration ostensibly aims to curb the inflow of skilled foreign workers. It also intends to increase visa fees.

These measures aim to benefit American high-skilled labor. However, if fully implemented, such measures could also negatively affect the profitability of major US corporations that rely on this workforce.

As a consequence, these policies will lead to greater wage differentials between Indian skilled workers in the US and their American counterparts.

The aggressive enforcement of anti-immigration laws will further disrupt the lives of many Indians in the US, potentially forcing some to return to India.

The Indian government’s muted response to these developments seems to reflect a strategic calculation—prioritizing the interests of Indian IT firms, which facilitate much of the skilled labor migration to the US, at the expense of less-skilled Indian immigrants who face heightened vulnerabilities.

Additionally, restrictive measures on family-based immigration pathways will lead to family separations, exacerbating financial and emotional distress for Indian worker households. A decline in remittances from Indian workers in the US, whether due to wage suppression, reduced immigration, or a combination of both, will disproportionately affect rural India.

Strategic and Economic Adaptations

India is proactively adapting to these policy shifts by engaging in negotiations for a bilateral trade agreement with the U.S., targeting a two-way trade goal of $500 billion by 2030. To ease trade tensions, India has already reduced tariffs on certain items, including high-end motorcycles.

The story of India’s Union Budget 2025 is significantly shaped by global factors, including the ongoing influence of Donald Trump. His stance on trade and international relations casts a large shadow over India’s economic policies, especially as the country grapples with slowing GDP growth, rising inflation, and trade imbalances.

The key challenge lies in balancing the need for fair trade relations with the US while ensuring India’s manufacturing sector remains competitive and doesn’t face the brunt of any tariffs or restrictions imposed by the US.

How Trump’s trade stance affecting India’s budget?

Donald Trump’s approach to trade, which includes focusing on a “fair” bilateral relationship, directly impacts India’s budget decisions. The recent challenges in India’s trade balance, marked by increased imports and stagnant exports, have heightened the need for the government to respond strategically. The focus is on securing favorable terms with the US, especially in sectors like pharmaceuticals and gems, which are critical to India’s export.

Impact on the Pharmaceutical Industry

The U.S.’s tariff policies have also affected the pharmaceutical sector. Lux share, a major Apple supplier, is considering shifting more production to the U.S. to avoid high tariffs on Chinese imports. This move reflects a broader trend where companies are re-evaluating their manufacturing bases in response to U.S. trade policies. For Indian pharmaceutical companies, which are significant exporters to the U.S., such shifts could necessitate strategic adjustments to maintain competitiveness in the American market.