Moral Responsibility to Protect Those Growing in India: FM Sitharaman on Import Tariffs

Finance Minister Nirmala Sitharaman has indicated that the government may ease some import tariffs on products that do not harm the domestic industry.

“I will lift tariffs on them provided it doesn’t, intended or unintended, hurt my own capacity to produce,” said Sitharaman during an event hosted by Republic Media Network in New Delhi on Tuesday. She further emphasised on "balancing the two." The Bloomberg cited the Finance Minister saying that every import tariff levied is explainable. She has "responsibility" to protect Indian companies.

Notably, Sitharaman's comment came days after Donald Trump was elected to become the United States president for a second term. Trump, during a campaign rally last month in Detroit, called India the biggest import tariff charger and  he vowed to introduce a reciprocal tax if elected to power against countries with such high tariffs.

"We really don't charge. China will charge us a 200 per cent tariff. Brazil is a big charger. The biggest charger of all is India,”  Trump said.

While responding to a question on the US president-elect Trump's proposed tariff policies, the Finance Minister said that the government has a moral responsibility to protect those who are growing in India and who can produce in India and also to encourage industries which need those imports.

 Read: Trump's Presidency may Benefit India, ASEAN Nations as Trade, Investments Divert Away from China: Moody's

An Outlook of India-US Trade Relations

The US is the top trade partner of India. In the last fiscal year, bilateral trade between India and the US witnessed a rise of over one-third in five years reaching $199.7 billion. With Trump naming Mike Waltz as his national security adviser, it is evident that his critical stance on China will not change which may see trade and investment flows diverting away from China and it could play to India's advantage. Trump during his recent campaign speeches also termed Indian Prime Minister Narendra Modi as a good friend.

India is already emerging as a liable and strategic and apparel sourcing partner for the US, as it continues to diversify its sourcing away from China. As per Press Information Bureau, India's market share in US apparel imports has risen from 4 per cent to 5.8 per cent over the last 10 years. In 2023, India’s apparel exports to the US totaled $4.6 billion, making it the fourth-largest supplier of apparel to the US market.

During Trump's first tenure between 2017 and 2021, India fostered a strong trade relationship  with the US. However, Trump has always been a critic of India's tariff policies, which he found excessively high. In 2019, Trump scrapped trade privileges under the Generalized System of Preferences (GSP) for India. This was the biggest beneficiary of a scheme that allowed duty-free exports of up to $5.6 billion. Later, India also imposed higher retaliatory tariffs on 28 US products. Trump had also removed India’s preferential trade status amid tariff disputes.