Trump tariffs: “It will harm the US more than India,” says former RBI chief Rajan
Virendra Pandit
New Delhi: After applauding the Narendra Modi government in January 2025, former RBI Governor Raghuram Rajan on Thursday said the reciprocal tariffs President Donald Trump has imposed on India, besides other countries, will impact the US more than the South Asian nation.
Speaking about the Trump administration’s decision to impose reciprocal tariffs on dozens of countries, Dr. Rajan said these would have only a limited impact on India.
“Let us recognize that, in the short run, this will adversely affect the US economy first and foremost – it is a self-goal as footballers would say. Coming to the effects on other countries, the direct effect of any tariff on India’s exports will be to raise prices for US consumers, reducing their demand, and hence Indian growth,” the media quoted him as saying.
Dr. Rajan, who is currently a Katherine Dusak Miller Distinguished Service Professor of Finance at the University of Chicago’s Booth School of Business, explained why he thinks the tariffs would have ‘smaller’ impact on India.
“Of course, to the extent that the US has applied tariffs on other countries also, and India is competing with producers from those countries, the overall effect will be smaller than if the tariffs had been applied only on India – since US consumers will not be able to substitute away to non-tariffed producers.”
He believes the US’s broader strategy, which aims to reduce imports and boost domestic production, may take time to fully materialise.
About the potential impact on India, he suggested that the tariffs could be ‘disinflationary’ for India. With fewer exports heading to the US, India might retain more goods domestically, while countries like China could attempt to target India’s market.
Dr. Rajan also saw an opportunity for India to turn this crisis into a potential gain by reducing its own tariffs. “That would be beneficial to India regardless of whether it will help us negotiate down US tariffs,” he added
He said the world is now much more protectionist, and therefore India needs to adapt “be more clever about trade.”
“Looking east toward the ASEAN and Japan, looking southwest to Africa, and looking northwest to Europe all make sense,” he said.
He also pointed out the importance of fostering stronger economic ties within South Asia, particularly through SAARC. “That means overcoming political differences. As the world breaks up into regional blocks, South Asia should not be the odd region out,” he said.
The former RBI Governor, who had famously joined Congress leader Rahul Gandhi’s “Bharat Jodo Yatra” in December 2022, however, applauded the Modi government in January 2025 for writing off legacy bad loans from the UPA era and doing a lot of good work on the infrastructure front in India.
President Trump on April 2 unveiled his promise of reciprocal tariffs on trading partners, which includes a 27 percent additional tariff imposed on imports from India as part of his country-specific tariff structure that will kick in from April 9.
The move that includes a baseline 10 percent tariff on all countries, which takes effect on April 5, is feared to trigger an escalating trade war with likely tectonic shifts in the global economic landscape.
Trump framed the tariffs as part of a broader economic strategy to rejuvenate the US economy, calling April 2, 2025, a ‘Liberation Day’ in the US.
