India & The New World

Taxation without Exemptation

Deepak Razdan

New Delhi, 3 April, 2025

“No taxation without representation” was Americans’ slogan to launch their freedom struggle against the British colonial raj. Last night, US President Donald Trump’s announcement of universal trade tariffs came without exemptions, although the US did hear representations from most countries during the pre-tariff consultations.

For Indians, the tariffs do pose some additional challenges for any kind of activity in foreign lands. The UK, the European Union (EU), as also major economies in the East, are hurt by the trade-restrictive tariffs, and certainly, these countries will not be in a welcoming mode to receive foreigners visiting for tourism, education, business or migration.

In his Rose Garden, White House address, Mr Trump said the US will welcome people coming in legally, “we need people,” he said, still Indians will need to be careful about their tours in other parts of the West as they may take some time to come to terms with the new economic situation.

Ever since the WTO pacts, the world had become increasingly inter-dependent, confident of no sudden imposition of unilateral tariffs or restrictions. The tariffs announced by Mr Trump can result in temporary shortages of goods imported from the US in many countries. Prices can go up as most countries contemplate retaliatory tariffs to counter the US action. New trade groupings of nations are likely to emerge. It’s a New World!

Mr Trump announced a 34 per cent reciprocal tariff for China. This was in addition to 20 per cent already announced for the major economic power. China imposes 67 per cent tariff on US goods. The tariff imposed on EU is 20 per cent, although it has 39 per cent tariff on US products. For Japan the additional tariff is 24 per cent as it imposes 46 per cent on the US. UK will have an additional tariff of just 10 per cent, which is the same it imposes on the US imports.

India maintains 52 per cent tariff on US imports, according to the US Administration. Mr Trump said India charges 70 per cent tariff on US motorcycles. In response to tariffs by other countries, the US President announced 25 per cent tariffs on all foreign made automobiles.

Giving an overview of the US economy, the biggest market in the world, he said the US was in such a bad shape that it can’t make sufficient antibiotics for its sick. The US today imports all of its computers, phones, televisions and electronics. A single shipyard in China produces more ships every year than all the shipyards in the US combined, he said.

“We are going to build all of them,” he said. The country was moving towards a “collapse,” he said. The tariffs were needed to rectify this situation, “we can’t be kind when we are cheated.” He said he could be really reciprocal, but had to restrain himself as that would have made things difficult for some nations.

Mr Trump has not spared Vietnam imposing 46 per cent on it (saying the country is imposing 90 per cent on US goods!), Bangladesh 37 per cent, quake-hit Myanmar and Sri Lanka 44 per cent each. For Taiwan the tariff rate is 32 per cent, South Korea 25 per cent, Thailand 36 per cent, Malaysia 24 per cent, Cambodia 49 per cent (as it charges 97 per cent on US goods), Singapore 10 per cent, Philippines 17 per cent, Pakistan 29 and Laos 48 per cent. War-hit Ukraine is too facing 10 per cent tariff.

Unveiling the tariffs with mixed emotions, Mr Trump said he will not be imposing as much tariff on the other countries as they are doing. Although the world is still in a state of disbelief, Mr Trump said for decades his country had been looted, pillaged and plundered by countries near and far, friend and foe. It is not going to happen anymore, he said. Foreigners had torn apart the “American dream,” he said.

The reciprocal tariffs “will make America rich” and usher in the Golden Age of America, he said. It’s our declaration of economic independence, he said, “It’s our turn to prosper.” Jobs and factories will come back to America, he said, “the tariffs will give us growth.”

Most other countries however believe Mr Trump has declared a global trade war, and many of them are announcing special economic packages to keep their economies going. "It is the beginning of a new era," according UK Prime Minister Keir Starmer. French Prime Minister François Bayrou says Trump's tariffs have created a "catastrophe" for both France and the US. Spain has already announced a euro14.1 bn package to support its economy. While Australia described the tariffs as “totally unwarranted,” Japan said these were “extremely regrettable.”

European Union leader Ursula von der Leyen said the tariffs are “a major blow to the world economy.” The tariffs will also hurt consumers around the world. It will be felt immediately. “We are already finalising a first package of countermeasures in response to tariffs on steel. Europe has the largest Single Market in the world - 450 million consumers – “that is our safe harbour in tumultuous times. Europe stands together for our businesses, for our workers, and for all Europeans,” she said.

The Indian Government stated the additional duty on Indian exports to the US will be 27 per cent. The government’s Department of Commerce is carefully examining implications of the various measures and announcements made by the US President. Keeping in view the vision of Viksit Bharat (a Developed India), the Department is engaged with all stakeholders, including industry and exporters, taking feedback of their assessment of the tariffs and assessing the situation. The Department is studying opportunities that may arise due to this new development in the US trade policy.

India and the US have been engaged in talks for quite some time to raise their trade levels and this dialogue can prove helpful to face the current difficult situation which is considered no less than a global crisis.  

After Mr Trump’s election for a second term of the US Presidency, Prime Minister Narendra Modi visited the US in February this year. Jointly with Mr Trump, he had announced on 13 February 2025 a ‘Mission 500’ – aiming to more than double India’s bilateral trade to US $500 billion by 2030. Accordingly, discussions are going on between Indian and US trade teams for an expeditious conclusion of a mutually beneficial, multi-sectoral Bilateral Trade Agreement (BTA).

The on-going talks are focused on enabling both nations to increase trade, investments and technology transfers. “We remain in touch with the Trump Administration on these issues and expect to take them forward in the coming days,” the government stated on 3rd April, 2025.

The government recalled its Comprehensive Global Strategic Partnership with the United States and stated it is committed to working closely with the US to implement the India-US ‘Catalysing Opportunities for Military Partnership, Accelerated Commerce & Technology’ (COMPACT) for the 21st century to ensure that the bilateral trade ties remain a pillar of mutual prosperity and drive transformative change for the benefit of the people of both countries.

India has been engaging with countries on its east for larger trade and strategic relations. None can however deny the enormity of the trade a country has with the US. The India-US trade and investment partnership was considered an engine for global growth, with their bilateral trade exceeding $191 billion in 2022, nearly doubling from 2014.