Donald Trump's latest push for reciprocal tariffs on countries with higher duties on American goods has sparked fresh debate over its potential impact on global trade, particularly on India’s exports. With Trump eyeing a return to the White House, his aggressive trade rhetoric has put nations like India in the spotlight, raising concerns about potential disruptions in long-established trade relations between the two economies. However, analysts at Jefferies remain unconvinced that these proposed measures will significantly impact the Indian rupee or force major market adjustments in the near future.
Trump has long been critical of what he views as unfair trade practices by other nations, and his latest proposal seeks to level the playing field by imposing reciprocal tariffs on imports from countries that charge higher duties on American products. This move could be particularly concerning for India, as the US remains one of its most crucial trading partners. Indian exports to the US include pharmaceuticals, petrochemicals, textiles, and IT services, all of which could face additional scrutiny under a Trump-led trade crackdown.
As per recent trade data, India was the 10th-largest exporter to the US in 2024. While India’s exports to the US have grown substantially over the years, its relatively high tariff structure remains a point of contention. India's average tariff rate stood at approximately 11% in 2023, significantly higher than the duties the US imposes on Indian imports. This imbalance makes India a potential target for Trump’s proposed policy, and there are fears that retaliatory US tariffs could make it more expensive for Indian businesses to sell their goods in the American market.
While concerns about the impact on Indian exports are valid, Jefferies' global forex head, Brad Bechtel, remains unconvinced that Trump's threats will have any meaningful impact on the Indian rupee or the broader forex market. Speaking to Reuters, Bechtel stated that the proposed tariff measures are not enough to trigger a sharp depreciation in the rupee or force any major realignment in currency markets. He pointed to the example of China, which faced much more severe tariffs under Trump’s previous presidency, yet saw only limited effects on its currency.
Bechtel further emphasized that any changes in trade policy would take time to implement, as they would involve negotiations, countermeasures, and potential legal battles. This means that even if Trump were to return to power and push through his tariff plans, the impact would not be immediate. Moreover, given the complexity of trade relationships, retaliatory tariffs could lead to diplomatic talks and adjustments rather than an outright economic standoff.
It is also worth noting that India and the US have recently agreed to engage in discussions toward an early trade deal, which could help de-escalate trade tensions before they escalate into a full-blown tariff war. Experts suggest that both countries have strong economic incentives to maintain positive trade relations, as the US is a key market for Indian exports, while India remains a significant consumer of American goods and services.
Despite these trade concerns, Bechtel expressed confidence that any potential tariffs would not drastically reduce India’s ability to export to the US. He pointed out that the impact of such measures depends largely on whether Indian goods can be substituted by products from other countries. Given India's strong position in sectors like pharmaceuticals and IT services, which rely on specialized expertise and supply chains, it is unlikely that US buyers would immediately shift away from Indian suppliers.
While trade uncertainties remain, the Indian rupee has already been under pressure in 2025 due to a combination of factors, including capital outflows, global economic uncertainty, and concerns over India's trade deficit. The currency recently hit a record low of 87.95 against the US dollar, making it one of Asia’s worst-performing currencies this year. While Trump's tariff threats add another layer of risk, analysts believe they are unlikely to be a decisive factor in determining the rupee’s long-term trajectory.
For now, market watchers remain cautious, keeping an eye on global trade developments, US election outcomes, and India’s negotiations with Washington. While Trump’s tariff threats may create short-term volatility, analysts suggest that India's trade fundamentals, strong domestic demand, and ongoing economic reforms will play a much larger role in shaping the country's economic future.
