The economic relations between India and the US are widely seen as good for both sides. Two-way trade is growing, and among Asian countries, India is routinely trading with more US than China, its neighbors and rivals.
But under President Trump, trade is a point of friction. Like the US and virtually every country, India operates surplus. Last year, it shipped about $87 billion worth of goods, imported $42 billion, adding $46 billion to the US trade deficit.
Trump doesn't like that kind of person. He opposed a country selling to more countries than they would buy. Queue his ferocious imposition of tariffs on both allies and enemies, causing retaliation and threats of uneasy global commerce.
During his first term, President Trump called India the “customs king.” He pointed out Indian duties as high as 100% on some American goods. He was particularly focused on tariffs that Harley-Davidson said were blocking more motorcycle exports. When Indian trade officials reduced their tariffs, Trump paraphrased them: “We want your president to be happy.” Isn't that good? ”
Tariffs are expected to become another topic of conversation when Trump sits in Washington with India's Prime Minister Narendra Modi this week. Here's what you need to know about the Indian and US trading relationship:
Is India really using American trade?
The trade surplus with India is growing under Modi, who took office in 2014. In 2021, the annual average amounted to around $20 billion to $24 billion, up to $33 billion. The two are growing at similar rates. As a whole, the surplus is almost stable.
India has a complex tariff list. There are hundreds of categories that are taxed at different rates, and can change dramatically from year to year. It is an Indian colonial heritage in which Britain used trade practices when exploiting its resources.
In 1990, since 1990, when India placed more emphasis on global trade and investment, the average tariff rate for most goods imported from the US has fallen from 125% to less than 5%.
Unlike most Asian countries, India has its own trade deficit that worries you. The United States is the world's largest of $1.2 trillion, but it's under 4% of the economy. Richard Rossow, who follows India at Washington's Center for Strategic and International Studies, said India, which relies on imports for most of its fuel needs, operates a deficit worth 8-12% in most years. I pointed it out. It reduced the value of the Indian currency, rupee, to a painful level.
What will India trade with America?
Most of what these two countries trade in are in the petroleum and petrochemical categories, or in the gemstone category. In both cases, the US loads India with a huge amount of raw or semi-processed material, and refineries and gem cutters process them in workshops. In some cases, the finished product will soon return to the US.
Other important parts of their economic relationship include trade in services, such as financial investments and high-end specialist work being carried out by staff sitting in India for American companies. But Trump has focused on commodity trade.
What can India do to satisfy Trump?
It leaves a little wiggle room for the two leaders. “Bringing back to the original Trump administration and having India buy more US hydrocarbons was top of the list along with defensive items,” Rosso said. Last week, Trump said he had argued for victory and agreed to import more liquefied natural gas after meeting with Japanese Prime Minister Isbauba.
India has spent between $1.5 billion and $4 billion on US defence imports in recent years, and will struggle to get into a new system that is expensive, like fighter jets. There are notable orders from Russian and French suppliers. Still, the weapons and gas that the Indian central government can buy alone holds promises as a way to curb trade imbalances.
There is room for India to make offerings through customs duties. American producers of bourbon and pecans hope that Trump may defeat the trade barriers that protect them from Indian consumers. Similar restrictions on poultry and California almonds have already been eased. Although India's demand for such goods is minimal, in trade negotiations, lower tariffs are lower tariffs.
Then, of course, there's Harley Davidson based in Milwaukee. The company's heavyweight bikes will suffer 50% tariffs on their way to India, but as of May 1, it will fall to 30% after recent changes by Modi's government. Since 2020, Harley has only exported hundreds of bicycles to India a year. Last year it worked with local manufacturers to devise a model that sells for around $3,000, selling over 14,000. However, none of them counted as imports.
