New Delhi: India has initiated an extensive analysis by sector, developing multiple scenarios to brace for a potential increase in tariffs on goods exported to the United States during the Donald Trump administration, according to various sources familiar with the situation. “Different ministries and departments are evaluating a range of scenarios in anticipation of such a move by the US and exploring possible countermeasures,” one source stated.Also Read: Trump’s stark warning to India risks significant consequences
President-elect Trump stated on Tuesday that the US would introduce reciprocal tariffs on Indian products due to the high tariffs imposed by New Delhi on American goods. Experts suggest that India might need to reassess its import duties on specific items and could offer increased market access for certain American imports to alleviate Trump’s concerns.
Previously, the US has raised concerns regarding the high import duties on Harley Davidson motorcycles, as well as limited access for medical devices, equipment, and dairy products in India.
Addressing US Concerns
Officials assert that India’s most favoured nation (MFN)-weighted average import tariff is relatively low, approximately 5-6%. While select agricultural products encounter higher tariffs, even those are significantly lower than the rates outlined by the World Trade Organization (WTO). They note that most countries, including the US, apply elevated tariffs and various non-tariff barriers on agricultural goods. For instance, dairy products, fruits and vegetables, cereals, food preparations, and oils in the US face tariffs as steep as 130-190%.
One insider mentioned that any thorough evaluation of the impact or necessary measures can only occur after the Trump administration officially takes over on January 20.
Experts suggest that New Delhi has the option to impose retaliatory tariffs or approach the WTO while advocating for a strategic response.
“It makes sense to reconsider certain products for tariff adjustments to address US concerns,” remarked one expert who preferred to remain anonymous due to the sensitive nature of the issue. While tariffs are bound by WTO commitments or linked to MFN status rather than being country-specific, there is an opinion that a measured approach could be taken when evaluating the product list traded between India and the US.
“It is unfeasible for India to implement country-specific tariffs, as that would violate the most-favoured nation (MFN) principle,” stated Ajay Sahai, director general of the Federation of Indian Export Organisations (FIEO).
Tariff Review
Sahai believes that India can revisit certain tariff lines and strategize accordingly, even if it results in a slight duty loss on some products.
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Here’s a brief overview of how tariffs operate in economics.
When a company imports a good or its component from a foreign country, let’s imagine it costs $20 prior to any tariffs. The company markets that item for $30 to consumers, achieving a modest profit.
However, if the country where the company is located imposes a 50% tariff on imports from the supplier country, the cost of that good rises to $30. To maintain profitability, the company is then compelled to charge consumers $40, thus transferring the added expense onto them.
The primary intention behind tariffs is not to penalize the exporting country but to encourage domestic production, prompting companies to source locally to avoid tariff costs. Nevertheless, if local alternatives are either unavailable or similarly priced, the burden of extra costs still falls on consumers, rather than the country from which the product was imported.
Moreover, tariffs can lead to adverse effects on global commerce, instigating countries to retaliate. For instance, if the U.S. imposes tariffs on imported goods, the UK may respond by imposing tariffs on American products, including notable brands like Harley-Davidson.
As reported by Politico, this is not the first instance of the U.K. imposing tariffs on American products. The last time this occurred was during Trump’s presidency concerning American steel. “The U.K. has retaliatory tariffs on iconic U.S. goods including Harley Davidson motorbikes ready to be immediately deployed in case of a trade war with Donald Trump,” the publication notes, adding, “The British government has been strategizing how to counter potential Trump tariffs on U.K. goods, with officials briefing ministers that they can reinstate former EU measures against the U.S. without further inquiry. Following Brexit, the U.K. maintained tariffs that the EU had imposed on U.S. products as a response to Trump’s steel tariffs.”
However, all these initiatives could be rendered ineffective if Harley-Davidson bikes, already among the priciest motorcycles on the market, increase in price by 10% to 30% because of retaliatory tariffs from the UK and possibly from the EU. Picture a $30,000 motorcycle suddenly escalating to $50,000 due to these newly enforced tariffs, a situation that could unfold almost overnight.
Photo by: Harley-Davidson
Harley EICMA Announcement
“Current and former government officials told Politico that the U.K. can swiftly reintroduce these tariffs on the U.S. if Trump acts on his threats to impose 10 to 20 percent tariffs on all imports, without facing opposition from Britain’s trade regulators,” the article notes, adding, “This can proceed without the typical need for an investigation by the independent Trade Remedies Authority, as these tariffs were suspended indefinitely by the British government in 2022 rather than being fully removed.”
If you’re skeptical, Harley experienced the negative consequences of tariffs during Trump’s last presidency as well. And this issue extends beyond just the U.K. and the EU; if Asian nations decide to impose their own counter-tariffs on American goods, particularly Harley-Davidson products, the impact could be detrimental.
With plummeting demand, an aging customer base, and a lineup that seems targeted at Baby Boomers—who are no longer purchasing motorcycles at the same rates—Harley is teetering on the brink of failure. Its best strategy for attaining long-term financial health lies in penetrating markets where small-displacement bikes are prevalent. But if even their desirable small-displacement 350 and 440 motorcycles become 10% to 30% more expensive, the company may lose its competitive edge against manufacturers like CFMoto, Bajaj, QJ Motors, and other reasonably priced domestic brands.
When you factor in additional macroeconomic challenges currently affecting the entire industry—such as high interest rates, stagnant wages, increasing inventory, economic instability, and lower-than-expected demand—Harley-Davidson finds itself in a precarious position, facing a multitude of challenges.
In summary, if these tariffs take effect and other nations retaliate—which they almost certainly will—Harley-Davidson may be facing serious trouble.
“It is unfeasible for India to implement country-specific tariffs, as that would violate the most-favoured nation (MFN) principle,” stated Ajay Sahai, director general of the Federation of Indian Export Organisations (FIEO).
