As Donald Trump prepares to take over as the US President for the second time in a star-studded inaugural ceremony on Monday, India is on the `wait and watch’ mode to see how tariff actions threatened by him play out against the country and the world, specifically China, before it plans further moves, sources said.

Discussions with the industry and within the government on possible duty cuts to make the US happy and also identification of offensive interests are on. But concrete steps to face and counter US actions can be planned only once the Trump regime shows its cards, an official told businessline.

“Trump has warned India of reciprocal tariffs so we need to identify items where it might be possible to lower tariffs. We also want to be ready with our asks. Additionally, higher tariffs on China could spell opportunity for Indian exporters. But we need to first know what exactly is coming our way,” the official said.

Trump has been threatening all trade partners, including India and China, with more tariffs when in office. His warnings of reciprocal tariffs has New Delhi worried as the US is by far India’s largest export market.

Top trading partner

“The US is India’s top trading partner, with exports to the US growing from $53.1 billion in FY20 to $77.5 billion in FY24, a 46 per cent increase, driven by strong US demand. So, if the US imposes tariffs, it will hurt Indian exports. The impact will depend on the products and tariff levels,” pointed out Ajay Srivastava, trade expert and founder of Global Trade Research Initiative.

India could work on lowering its simple average tariffs to 10 per cent from 17 per cent, strengthen `Make in India’ by focussing on deeper manufacturing and also be prepared for calibrated response to any unwarranted action by the Trump government, Srivastava proposed.

Trump had showed his resentment also for foreign workers during his first stint as US President and had increased scrutiny of H-1B visa applications. This led to rejection rates reaching an all-time high of 24 per cent in 2018, pointed out Biswajit Dhar, Distinguished Professor, CSD.

“Trump’s decision to include technology entrepreneurs Elon Musk and Vivek Ramaswamy in his cabinet may indicate a change in heart in terms of presence of skilled workers in the country. But on tariffs he is expected to be very tough,” Dhar said.