New Delhi, 30 January: Former U.S. President Donald Trump referred to India, China, and Brazil as “tremendous tariff-makers,” warning that his administration would impose higher tariffs on imports from these countries if he returns to office. He mentioned that his trade policies prioritize American interests, a stance that could make Indian exports to the U.S. less competitive.
Concerns have emerged that Indian exports such as textiles and pharmaceuticals may face additional tariffs. In his first term, Trump imposed duties on aluminum and steel imports in 2018, triggering retaliatory measures from affected countries, including India.
India-U.S. Trade Relationship
The United States remains India’s largest market for merchandise exports, accounting for over 18% of total shipments. In the 2023-24 fiscal year, India exported goods worth $77.5 billion to the U.S., a figure surpassing the combined value of exports to its next three largest trading partners. This trend has continued into 2024-25.
Despite India’s high export volume, imports from the U.S. are significantly lower, representing just over 6% of total trade. In 2023, India’s imports from the U.S. declined by 17% to $42.2 billion. This trade imbalance has contributed to the U.S. deficit in bilateral trade with India, prompting Trump’s renewed tariff threats.
Composition of Bilateral Trade
Petroleum crude and products make up about a third of India’s imports from the U.S., followed by pearls, precious stones, and imitation jewelry. Other major imports include power plant equipment, nuclear reactors, aircraft, medical instruments, and military hardware, as India diversifies away from Russian defense supplies.
India’s exports to the U.S. include petroleum products, drug formulations, telecom instruments, electrical machinery, apparel, and electronic components. The export of these goods grew significantly following the disruptions caused by the COVID-19 pandemic.
Trump has repeatedly called for India to lower tariffs on American goods and increase imports from the U.S. Following a recent phone conversation between Trump and Prime Minister Narendra Modi, the White House issued a statement mentioning the need for a “fair bilateral trading relationship” and greater Indian procurement of American-made security equipment.
During his presidency, Trump frequently raised concerns over India’s high import duties, particularly citing the case of Harley-Davidson motorcycles. India reduced tariffs on the motorcycles by 50% in 2019, and the company later began domestic production.
Ajay Srivastava, co-founder of the Global Trade Research Initiative, mentioned that Trump often cites the highest tariff rates when demanding reductions. While the U.S. imposes an average import duty of 3.3%, India’s average stands at 17%, with some products—such as whiskey and wine—facing a 150% duty, and automobiles, 125%. Despite these tariffs, India remains compliant with World Trade Organization (WTO) obligations.
Will India Reduce Tariffs?
India applies the same duties on U.S. imports as on those from countries with which it has no free trade agreement (FTA). A tariff reduction could have been considered if India and the U.S. had finalized an FTA. However, the Indo-Pacific Economic Framework for Prosperity (IPEF), a regional initiative involving both countries, does not include tariff reductions in its scope.
Budgetary policies also prevent India from offering concessions to a specific country. Any general tariff reduction could benefit competitors such as China and Vietnam rather than the U.S. Srivastava mentioned that India should first assess U.S. demands before making any policy changes.
Can India Increase Imports from the U.S.?
Trade is primarily driven by private-sector transactions, with commercial considerations playing a key role. While the U.S. is keen for India to purchase more American defense equipment, this could materialize as India looks to reduce reliance on Russian military supplies.
Currently, petroleum crude and related products are India’s top imports from the U.S. However, increasing these purchases would depend on whether American oil firms offer better pricing than suppliers from the UAE and Russia.
Srivastava mentioned that the U.S. should look beyond the trade deficit and focus on broader economic relations. India is a critical market not only for traditional American businesses, banks, and financial institutions but also for tech giants like Microsoft, Meta, and Alphabet. E-commerce leaders such as Amazon and Walmart have significant investments in India, and social media companies count India as their largest user base.
