‘India, U.S. in talks to mitigate impact of reciprocal tariffs’

India can mitigate the impact of higher U.S. tariffs through talks and by providing greater market access to U.S. farm products and increasing energy purchases, Moody’s said on Tuesday.

“Most companies in our rated portfolio are domestic-focused with limited exposure to the U.S. market. To mitigate pressure from reciprocal tariffs, the U.S. and India are reportedly now in talks for India to lower import tariffs on select U.S. products, increase market access for U.S. farm products and increase U.S. energy purchases, while seeking to initiate a trade deal by the fall of 2025,” the rating agency said.

In the Asia Pacific region (APAC), developing countries like India, Vietnam and Thailand have the widest rate differentials relative to the U.S. and the most exposed sectors from here include electronics, motor vehicles, food and textiles.

As far as India is concerned, it has a lower overall exposure relative to most others countries in the region, although certain sectors such as food and textiles as well as pharmaceutical products face risks, the rating agency said.

According to Amnish Aggarwal, Director, Institutional Research, Prabhudas Lilladher (PL), India is unlikely to experience any “meaningful negative effect” from U.S. policies, as soft crude oil prices, geopolitical stability, and increased technology transfer to India would neutralise the costs of Trump’s tariffs. 

“The reciprocal tariffs announced by the Trump 2.0 administration, incorporating non-tariff barriers (NTBs), VAT structures, and exchange rate deviations, make the process more complex and its economic cost harder to quantify as of now,” he said while speaking at a webinar on ‘India Strategy’ on Tuesday. 

“With India’s weighted average MFN tariff at 12%, the highest among G-20 nations, it is a prime candidate for scrutiny. Even if U.S. tariffs on India rise to 15-20% by April 2025, India’s key export sectors namely pharmaceuticals, electronics, jewelry, and textiles, operate within low tariff differentials, which reduces exposure to tariff escalation,” he said. 

Stating that India’s exports are mitigated by a highly diversified export base by new trade routes through Europe and the Middle East (IMEC), he said, while tariff negotiations will remain a short-term market overhang, the structural foundation of India-U.S. trade remains intact. 

“Technology, defence, and nuclear energy have high growth potential. India’s ability to navigate tariff negotiations, leverage its geopolitical positioning, and realign supply chains ensures that this phase is a momentary recalibration, not a retreat,” he emphasised.