The U.S. slapped a 26% tariff on imports from India in a setback to the South Asian nation's expectation of getting relief from President Donald Trump's global trade policy that has unnerved world markets for weeks.
A baseline 10% baseline tariff starts on Saturday before the remaining, higher reciprocal tariff takes effect from April 9.
"They (India) are charging us 52% and we charge almost nothing for years and years and decades," Trump said at the White House while announcing the reciprocal tax.
Trump has slapped higher duties on other countries, including 34% on China on top of a 20% tax announced earlier, and 46% on Vietnam.
The relatively lower tariffs imposed on India calmed equity markets.
India's benchmark share indexes, the Nifty 50 (.NSEI), opens new tab and the BSE Sensex (.BSESN), opens new tab, were down 0.3% each at open, lower than the 1.5% to 3% losses seen across other Asian markets. The rupee fell as much as 0.3% to 85.75 against the dollar in early trade but recovered to 85.65.
India gains a natural competitive advantage in several key sectors due to the relatively lower tariffs imposed, research firm Global Trade Research Institute said in a note.
Nearly $14 billion worth of electronics products and over $9 billion worth of gems and jewellery are among the top sectors to be hit by the U.S. tariffs.
The Trump administration, however, exempted pharmaceutical exports from the tariff bringing cheer to India's pharma industry. The U.S. accounted for nearly a third of India's pharmaceutical exports - mainly cheaper versions of popular drugs - with sales of about $9 billion last fiscal year.
Shares of Indian drugmakers rose nearly 5% in early trade on Thursday in contrast to the drop in the broader stock market.
India's export competitiveness would be less impacted than key rivals due to its position in the middle of the tariff rates, said the country's industry bodies, Assocham and the Federation of Indian Export Organisations.
The duty of 26% was based on tariff and non-tariff barriers including currency manipulation, the Trump administration said.
India imposed "uniquely burdensome" non-tariff barriers, the removal of which will increase U.S. exports by at least $5.3 billion annually, the White House said.
The tariffs would remain in effect until Trump determined that the "threat posed by the trade deficit and underlying non-reciprocal treatment is satisfied, resolved, or mitigated," the statement added.
The U.S. has a trade deficit of $46 billion with India.
A snapshot of trade volumes and tariffs across U.S. and India
AMONG TRUMP'S FRIENDS
The reciprocal tariff will add pressure on Indian Prime Minister Narendra Modi, who counts himself among Trump's friends, to find ways to get India off the hook.
Last week Reuters reported that New Delhi is open to cutting tariffs on U.S. imports worth $23 billion to mitigate the impact on its exports in sectors like gems and jewellery, pharmaceuticals and auto parts.
administration has taken a number of steps to win over Trump by lowering tariffs on high-end bikes, bourbon and dropping a tax on digital services that affected U.S. tech giants.
Before the reciprocal announcement, the U.S. tariff rates were among the lowest, with simple average tariffs at 3.3%, compared with India's 17%, the White House said.
Ajay Sahai, director general at the Federation of India Export Organisations, said the reciprocal tariff on India was lower than key competitors like Vietnam and Bangladesh, which could help Indian apparel and footwear sectors.
