President Trump issued the
Executive Order 14257 of 2 April 2025 ("Order"). The Order is titled "Regulating Imports With a Reciprocal Tariff To Rectify Trade Practices That Contribute to Large and Persistent Annual United States Goods Trade Deficits". The order is approximately 71 pages. It is not sure if Indian media houses have discussed or analysed this Order.
There is a lengthy introduction to the Executive Order, seven sections and three annexures. The Order is purported to be issued by the President of the US purportedly under the authority of the US Constitution and US Laws, including the International Emergency Economic Powers Act (
50 U.S.C. 1701
et seq.)(IEEPA), the National Emergencies Act (
50 U.S.C. 1601
et seq.)(NEA), section 604 of the Trade Act of 1974, as amended (
19 U.S.C. 2483), and
section 301 of title 3, United States Code,
India has been mentioned at least six times expressly in this order. On the Most Favoured Nation ("MFN") status and implications on US tariff, the Order states:
"Put simply, while World Trade Organization (WTO) Members agreed to bind their tariff rates on a most-favored-nation (MFN) basis, and thereby provide their best tariff rates to all WTO Members, they did not agree to bind their tariff rates at similarly low levels or to apply tariff rates on a reciprocal basis. Consequently, according to the WTO, the United States has among the lowest simple average MFN tariff rates in the world at 3.3 percent, while many of our key trading partners like Brazil (11.2 percent), China (7.5 percent), the European Union (EU) (5 percent), India (17 percent), and Vietnam (9.4 percent) have simple average MFN tariff rates that are significantly higher." (emphasised)
In other words, this para of the Order states that while the WTO obligations relating to MFN have created a scenario where average US tariff is at only 3.3%, countries such as India impose average tariffs at 17%. Note that India's tariff is the highest among the countries mentioned, the next highest being Brazil at 11.2%.
For those uninitiated to the concept of MFN, please see
here.
The Order then goes on to state that tariffs on particular products reveal far more discrepancies than the average tariffs noted:
"Moreover, these average MFN tariff rates conceal much larger discrepancies across economies in tariff rates applied to particular products. For example, the United States imposes a 2.5 percent tariff on passenger vehicle imports (with internal combustion engines), while the European Union (10 percent), India (70 percent), and China (15 percent) impose much higher duties on the same product. For network switches and routers, the United States imposes a 0 percent tariff, but for similar products, India (10 percent) levies a higher rate. Brazil (18 percent) and Indonesia (30 percent) impose a higher tariff on ethanol than does the United States (2.5 percent). For rice in the husk, the U.S. MFN tariff is 2.7 percent (
ad valorem
equivalent), while India (80 percent), Malaysia (40 percent), and Turkey (an average of 31 percent) impose higher rates. Apples enter the United States duty-free, but not so in Turkey (60.3 percent) and India (50 percent)."
The statistics in the aforesaid Para are tabulated for the convenience of the readers:
It is in this background facts, among others, that the Executive Order has been passed. It needs to be examined from an Indian perspective as to whether these facts are correct and the justification for India to impose higher tariffs.
Section 1 of the Executive Order declares national emergency and states: "I have declared a national emergency arising from conditions reflected in large and persistent annual U.S. goods trade deficits, which have grown by over 40 percent in the past 5 years alone, reaching $1.2 trillion in 2024." This trade deficit is, according to the Order, owing not only to tariffs but also to non-tariff barriers such as "technical barriers to trade; non-scientific sanitary and phytosanitary rules; inadequate intellectual property protections; suppressed domestic consumption (
e.g.,
wage suppression); weak labor, environmental, and other regulatory standards and protections; and corruption." Section 1 also describes the consequences of these barriers:
"The cumulative effect of these imbalances has been the transfer of resources from domestic producers to foreign firms, reducing opportunities for domestic manufacturers to expand and, in turn, leading to lost manufacturing jobs, diminished manufacturing capacity, and an atrophied industrial base, including in the defense-industrial sector. At the same time, foreign firms are better positioned to scale production, reinvest in innovation, and compete
in the global economy, to the detriment of U.S. economic and national security."
Ultimately, these barriers are some how related to "national security" and "military readiness". "Finally, the large, persistent annual U.S. goods trade deficits, and the concomitant loss of industrial capacity, have compromised military readiness; this vulnerability can only be redressed through swift corrective action to rebalance the flow of imports into the United States."
The linkage to national security and military readiness is perhaps, owing to the need to justify the Order and safeguard against challenges, both under US and international trade laws.
Note that the focus of the Order is on domestic production, domestic manufacturing and atrophy of industrial base. Readers may like to connect it with the previous post regarding Mr. Trump's election agenda on similar lines.
Section 1 declares national emergency. Section 2 provides for reciprocal tariff policy. It contemplates imposition of "additional ad valorem duty" on all imports, which would start at 10%. Thereafter, it would increase to the rates mentioned in Annex I to the Order. This duty would apply, according to the Order, until such time as Trump determined that the underlying conditions mentioned in the order were "satisfied, resolved, or mitigated." Annex I mentions the "Reciprocal Tariff, Adjusted" for India as 26%.
More on the Executive Order in another post.