On assuming office, US President Donald Trump signed an executive order imposing 25% tariffs on Mexico, 25% on Canada, and 10% on China. The tariffs came into effect on Saturday, February 1. Alternately, Trump has threatened BRICS (Brazil, Russia, India, China and South Africa) nations with 100% tariffs if they replaced the US currency as the global currency.  

Trump's threats of ‘reciprocating tariffs’ may have had a role to play in the promotion of exports in the Union Budget 2025-26 of India, presented by Finance Minister Nirmala Sitharaman on Saturday.

“Ministry of Micro, Small & Medium Enterprises (MSME) to be the second engine, as it contributes to 45% of exports,” said FM Sitharaman as she presented the budget.

Sitharaman defined exports as the fourth engine of growth and said that jointly driven by the Ministries of Commerce, MSME, and Finance, the Export Promotion Mission will help MSMEs tap into the export market.

The goal, might not be limited to just the strengthening of MSME and exporting businesses, as the Finance Minister, presenting her eight budget may be aiming to protect businesses from Trump’s star spangled fist of tariffs and restrictions.

For India’s industries to remain in business, they must sell and succeed in the USA, and high-tariffs may have adverse effects on it. To combat that, the finance minister proposed an Export Promotion Mission.

It is likely to be jointly driven by the Ministries of Commerce, MSME, and Finance. It will offer export credit, cross-border support, and tackle overseas markets.

The mission aims to support the manufacturing sector and incentivise its expansion into international markets.

Sitharaman stated that support would be provided to manufacturing industries for them to integrate into global supply chains.

She also mentioned that facilitation groups, made up of senior officials and industry representatives, would be formed to focus on specific products and supply chains.

By offering overseas support and incentives to fend-off challenges in global markets, India is likely preparing for the ‘Trump challenge'.

Trump’s warning

Donald Trump in December 2024 had warned India of imposing a reciprocal tax as India levies ‘high tariffs’ on American products.

Trump’s intentions to impose the same tax on Indian products meant a potential trade war between India and the United States.

What did Donald Trump say?

In response to what he referred to as the ‘high tariffs’ imposed by India on certain US imports, Trump reiterated his intention to impose reciprocal tariffs, directly threatening India.

While speaking to the media, Trump said, “Reciprocal – whatever tax India imposes on us, we will impose the same on them.” He openly accused India of charging excessive taxes on the US and said, “India imposes high tariffs on almost everything, and we forgive them, but this will no longer continue.”

While responding to a question about a potential trade deal with China, Trump commented on countries like India and Brazil, accusing them of levying high tariffs on certain American products. He emphasised the importance of the concept of ‘reciprocal’, stating that ‘if they tax us, we tax them’, the US will no longer hesitate to respond in kind.