The US reciprocal tariffs are expected to disrupt export demand across the Asia-Pacific (APAC) region but to a lesser extent in India, creating challenges for economies with high exposure to US trade, according to a report released by Moody’s Ratings on Thursday, February 27.
India's exposure is lower than most others in the region, although certain sectors such as food and textiles as well as pharmaceutical products face risks.
Ongoing negotiations between New Delhi and Washington are expected to shape the extent of the impact, the report said.
To mitigate pressure from reciprocal tariffs, the US and India are in talks, reportedly for New Delhi to lower its tariffs on select US products, increase market access for US farm products and increase US energy purchases, while seeking to initiate a trade deal by the fall of 2025, it said.
The US plan, which aims to match tariffs with those imposed by its trading partners on US goods, has raised concerns over potential disruptions in global trade flows. India has a history of retaliating against the US. In 2018, when the US imposed tariffs on Indian steel and aluminium, India responded by raising tariffs on 29 US products, recovering an equivalent amount in revenue, Moody’s Ratings said.
APAC economies are particularly vulnerable due to their trade structures and tariff discrepancies with the US. Countries like India, Vietnam and Thailand maintain higher most-favoured nation (MFN) tariff rates compared with the US, which imposes a trade-weighted average MFN tariff of just 2.2 percent, the lowest globally, it said.
Vietnam, which recorded a trade surplus of $123 billion with the US, faces heightened risks of retaliatory action.
Japan and South Korea, which benefit from lower tariff rates and existing trade agreements, may find some relief, although their key industries, including automotive and electronics, remain exposed, it said.
