When Finance Minister Nirmala Sitharaman presented the Union budget in Parliament on February 1, 2025, an unexpected event occurred. I am not referring to the cuts in income tax rates but reductions in India’s tariff rates. In a surprising move, the finance minister announced that India would lower its tariff rates on various products, including passenger cars and solar cells.
This was unexpected because India’s tariffs have only increased in recent years, ever since Arun Jaitley declared in the 2018 budget that his government was making a “calibrated departure” from the previous two decades of lowering tariff rates. A few days after the 2025 budget presentation, India announced lowering tariff rates on bourbon whiskey without altering the rates for other alcoholic beverages. Connecting the dots to understand India’s sudden penchant for tariff liberalisation is not too difficult. All this was aimed at placating United States President Donald Trump, who, during his election campaign and after assuming office, kept on belligerently targeting India and other countries for imposing high tariffs on American goods.
Not fully satisfied with India’s unilateral tariff cuts, Trump continued to show this aggression during Prime Minister Narendra Modi’s visit to the US in February and afterward. His reciprocal tariffs – an extra international law measure where the US intends to weaponise tariff rates by increasing them to align with the tariffs other nations impose on American goods – kicked in on April 9 against India and many other countries. Trade economists and international relations scholars are evaluating the advantages and disadvantages of the US’s aggressive trade policies. This is important because Washington is New Delhi’s largest trading partner and a crucial strategic ally. How India’s tariffs and the US’ reciprocal tariffs issue stack up in international law has been significantly under-analysed, however. This article assesses those alongside implications for the planned multi-sectoral bilateral trade agreement (BTA) between India and the US.
