Former RBI Governor Raghuram Rajan calls Trumps new tariffs a 'self-goal', India to see limited impact

raghuram rajan

New Delhi: Former Reserve Bank of India (RBI) governor Raghuram Rajan on Thursday criticized the Trump administration’s newly imposed reciprocal tariffs on approximately 60 countries, calling it a "self-goal." He warned that the move would mainly harm the US economy in the short term. However, Rajan noted that the impact on India would be comparatively minor.

US President Donald Trump recently introduced additional ad-valorem duties, ranging from 10% to 50%, on imports from all trade partners. The initial 10% tariff is set to be implemented on April 5, with a higher 27% duty coming into effect on April 9. However, certain industries, such as pharmaceuticals, semiconductors, and energy products, will be exempt from these tariffs.

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Raghuram Rajan explains how US will be affected first and its Impact on Indian Economy

"Let us recognise that in the short run, this will adversely affect the US economy first and foremost — it is a self-goal as footballers would say," Rajan told PTI.

"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."

 "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."

Speaking on Trump’s broader economic strategy, he said, "The long-term intent of Trump is to increase US production, but, even if feasible, that will take a long time to set up."

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India should lower its domestic tariffs to enhance trade and improve global competitiveness

Rajan recommended that India lower its domestic tariffs to enhance trade and improve its global competitiveness.

"We can certainly bring down the tariffs we have been raising — that would be beneficial to India regardless of whether it will help us negotiate down US tariffs."

"More generally, India needs to understand the world has become much more protectionist, so we have to be more clever about trade." 

He urged India to strengthen ties with Asean, Japan, Africa, and Europe while also focusing on regional cooperation. "That means overcoming political differences. As the world breaks up into regional blocks, South Asia should not be the odd region out."

While announcing the tariffs from the White House Rose Garden, Trump portrayed them as a pivotal move to rejuvenate American industry. 

"This is Liberation Day, a long-awaited moment. April 2, 2025, will forever be remembered as the day American industry was reborn, the day America's destiny was reclaimed, and the day that we began to make America wealthy again. We are going to make it wealthy, good, and wealthy."

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