President Donald Trump stated that Prime Minister Modi plans to impose reciprocal tariffs on India.

President Donald Trump stated that he told Prime Minister Narendra Modi that the United States would impose reciprocal tariffs on India. He claimed to have dismissed India’s objections to his decision during their recent meeting at the White House and indicated that Tesla building a factory in India was “very unfair” to the U.S.

Trump reiterated his concerns about India’s high tariffs, a point backed by Elon Musk, Tesla’s owner, during a joint interview they gave to Fox News. Although the interview was recorded earlier, it was broadcast on Tuesday night Eastern Time (Wednesday morning IST).

Starting with his claim that “every country” takes advantage of the U.S. through tariffs, Trump cited the example of tariffs on cars in India. He turned to Musk and said, “It’s impossible for him to sell a car, practically, in, as an example, India. I don’t know if that’s true or not, but I think…” Musk immediately intervened to finish Trump’s thought, stating, “The tariffs are like 100% import duty.” In reality, the import duty on electric vehicles costing at least $35,000 is 15% in India, subject to certain conditions.

Trump added that if Musk wanted to build a factory in India, it was “okay” but also “unfair” to the U.S. He said, “That’s unfair to us. It’s very unfair.” Using this point as a basis, Trump recounted telling Modi, “Here’s what we will do. We are going to… be very fair with you.” Before Trump could finish, the interviewer asked if the tariffs India charged were 36%. Trump responded, “Much, much higher.” Musk interjected again, saying, “It’s 100% on auto imports... 100%.”

Continuing his response, Trump discussed his conversation with Modi: “I said, ‘Here is what we are going to do: reciprocal. Whatever you charge, I am charging.’” Trump claimed Modi responded, “No, no, I don’t like that,” to which Trump replied, “No, no, whatever you charge, I am going to charge. I am doing that with every country.” Musk again supported Trump by saying, “It seems fair.”

Trump laughed, asserting that this approach was indeed fair and that no one could argue with him on the matter. He claimed the media could no longer say that his imposition of tariffs was “terrible.” “I don’t say that anymore because I say, ‘Whatever they charge, we will charge.’” Musk added that “it needs to be at a level playing field” and be “fair and square.” Trump concluded by stating that they would now “make a lot of money” and that “a lot of businesses” would come pouring in.
The ministry of external affairs did not respond to Trump’s comments about the negotiations with Modi.
In the interview, neither Musk provided more details on auto import duties, nor did Trump clarify what he meant regarding Musk potentially establishing a factory in India. However, it's important to note that India has previously imposed high tariffs on electric vehicles (EVs). Just before the 2024 elections, India introduced a new EV policy that reduced import duties on EVs, contingent upon the manufacturer setting up a factory in India within a specified timeframe. This policy was widely perceived as an effort to attract Tesla, although Musk chose to enhance his business activities in China rather than expand operations in India. Additionally, Trump has expressed concerns in the past about Harley Davidson being compelled to establish a plant in India to evade high duties.

On Tuesday, the US carmaker posted 13 job openings in suburban Mumbai for various customer-facing and backend roles, just days after Modi met with Musk. The comments from both Trump and Musk appeared to address two interconnected aspects of India's economic policy: high tariffs on foreign goods and incentives for foreign manufacturers to establish domestic operations. From Trump’s perspective, both elements are part of a zero-sum game that negatively impacts America—by imposing high taxes on US products, reducing their competitiveness, or prompting US manufacturers to set up plants abroad, thereby costing American jobs. Trump's stance against US companies establishing factories in India indicates a shift away from his previous policy of friendshoring, which encouraged investment in partner countries like India.

Last Thursday, shortly before his meeting with Modi, Trump signed a memorandum asserting that while the US is open to trade with other countries, those countries impose disproportionately high barriers on American products. He attributed America's large trade deficits to this “lack of reciprocity." Trump subsequently announced a “Fair and Reciprocal Plan” to address non-reciprocal trading arrangements by determining equivalent reciprocal tariffs in relation to each foreign trading partner. This evaluation would consider the tariff rates charged on US products, any “unfair, discriminatory, or extraterritorial taxes” levied on US businesses, non-tariff barriers, burdensome regulatory requirements, and mercantilist policies that undermine the competitiveness of US products. Many of India's policies may fall under this definition, potentially leading to increased tariffs on Indian imports.

Trump raised these issues several times, both privately and publicly, during Modi’s visit. Both sides agreed to appoint senior officials to finalize the first phase of a bilateral trade agreement (BTA) by the fall of this year. 

Alexander Slater, managing director at Capstone, a policy forecasting and strategic advisory group in Washington, D.C., and a former India-based managing director of the US-India Business Council, remarked that Trump’s tariff threats are serious. He anticipates that Trump will either move forward with broad tariffs on non-Chinese trading partners as part of the recently announced reciprocal tariffs or the universal tariffs proposed during the campaign, or a combination of both.

Slater stated, “The best approach for any country seeking exemption is to develop strategies to reduce its goods trade deficit with the United States. The Trump Administration views these deficits as indicators of unfair trade practices. This is evident in the President’s comments about reciprocal tariffs—the motivation is to rectify these imbalances. The key for countries is to address these concerns in ways that align with their own needs.” He added that, for India, this could involve “increasing energy purchases” and “making security-related purchases” that would enhance its ability to secure its borders, particularly with China.