India's robust trade relationship with the United States stands at a crossroads as former President Donald Trump returns to the political stage, wielding trade measures that could impact America's allies and rivals alike. This development comes amid India's significant export achievements to the US, which have surged considerably in recent years. India's export portfolio includes textiles, pharmaceuticals, engineering goods, petroleum oils, machinery, and cut diamonds. The country has also shown willingness to improve trade relations by reducing import taxes on various US goods.
In 2023, bilateral trade between India and the US surpassed $190 billion, marking a substantial increase from previous years. Merchandise exports to the US have risen by 40% to reach $123 billion since 2018, while services trade grew 22% to $66 billion. This thriving trade relationship reflects India's broad export base and its strategic economic ties with its top trading partner.
"This diverse range of products reflects India's broad export base and its strong trade relationship with the US," – Ajay Srivastava, founder of the Delhi-based think tank Global Trade Research Institute (GTRI).
Historically, India has been cautious with foreign direct investments. In the 1970s, American political scientist Joseph Grieco described India as having one of the "most restrictive, cumbersome… regimes regulating foreign direct investments." However, India's trade strategy has evolved significantly over the decades. The country has reduced tariffs on heavyweight motorcycles with engines above 1,600cc from 50% to 30%, and on smaller bikes from 50% to 40%. Additionally, India zeroed out import taxes on satellite ground installations in 2023, benefiting US exporters who supplied $92 million worth.
Tariffs on synthetic flavouring essences dropped from 100% to 20%, reflecting $21 million in US exports last year. Duties on fish hydrolysate for aquatic feed fell from 15% to 5%, accounting for $35 million in US exports in 2024. These moves underscore India's commitment to fostering a favorable trade environment with the US.
Despite these efforts, concerns remain about potential trade tensions under Trump's influence. Ajay Srivastava highlighted the risk by stating:
"Canada and Mexico are literally two arms of the US. If he has acted against them, he could easily act against India too."
In recent years, India dropped retaliatory tariffs on US-made almonds, apples, chickpeas, lentils, and walnuts in 2023, signaling a readiness to negotiate and avoid conflict. Moreover, India's openness to accepting the deportation of undocumented Indian migrants in the US without resistance has been perceived as a positive diplomatic gesture.
Top US exports to India included crude oil and petroleum products valued at $14 billion in 2023, along with LNG, coal, medical devices, scientific instruments, scrap metals, turbojets, computers, and almonds. This trade dynamic showcases the interdependence between the two nations across various sectors.
Aseema Sinha, author of "Globalizing India: How Global Rules and Markets are Shaping India's Rise to Power," contextualized India's approach to global trade:
"a self-driven industrialisation drive, export pessimism, and suspicion of global alliances."
Experts warn that future negotiations could be challenging. Mr. Dhar noted:
"This is where we will drive a hard bargain, and problems could arise."
Leave a Reply