No pre-emptive tariff cuts on US imports as India prepares for tricky trade dance with Trump

Three officials aware of discussions in the central government said on condition of anonymity that while India will make no unilateral offer of trade and tariff concessions, it will engage with Washington to ease market access to US products in the country.

India will also seek assurances that the US will not raise taxes or impose additional trade barriers against Indian products, these officials said.

“While the Indian government is preparing for talks with the new US administration, there are no plans to lay the red carpet on the tariff front," one of the officials cited above said.

Last time Trump was US president, he had labelled India a “tariff king" in July 2019, pointing to the 100% duty on imports of Harley-Davidson motorcycles in particular. Although India cut that down to 50% soon after, Trump still called it “unacceptable". Earlier, in March 2018, after the US imposed tariffs on Indian steel and aluminium, India countered by raising tariffs on 29 American products.

With trade talks likely to be held soon between the two countries, India may consider increasing imports of crude oil, medical devices and agricultural products—such as cotton, fruits, and animal feed ingredients—from the US, the first person cited above said.

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“Market access for apples, long-staple cotton, blueberries and almonds from the US are also likely to be part of the talks," the first person said. “These products are vital for both countries and discussions are likely to focus on removing trade barriers, ensuring fair access, and addressing any regulatory hurdles that could hinder trade."

Another critical issue India is preparing to include in its playbook is market access for US firms in satellite communication, which has been a contentious issue, especially with Elon Musk-owned Starlink vying to start its operations in India.

US-made electric vehicles and components and motorcycles are also likely to be a key element of trade discussions.

Equally, given the critical demand for essential and life-saving India-made products such as pharmaceuticals and drugs, the US may be hesitant to increase tariffs on these items, as they are crucial for both domestic needs and the broader global supply chain, the second person mentioned above said.

“In return, the US may seek greater market access for its premium healthcare products, such as medical devices and other related items. The US may push India to ease regulations or reduce tariffs to allow for more favourable entry into the Indian market," the second person said.

Any policy-level interventions by India will be carefully crafted to foster mutual growth and ensure that the trade relationship continues to evolve constructively and equitably, the third person mentioned above said.

“Increased US crude oil production is beneficial for India, as it will help keep prices stable. India remains open to sourcing more crude oil from the US if it is offered competitive prices," this person said.

Petroleum minister Hardeep Singh Puri earlier this week said that India welcomes increased oil and gas supplies, with the US seen as a key source, noting that the resultant oversupply could help lower prices. He noted the US’s potential to boost production by 1.4-1.5 million barrels per day under Trump, who has promised to “drill, baby, drill".

Meanwhile, Ashwini Vaishnaw, the Union minister of railways, information and broadcasting, and electronics and IT, told Bloomberg on Thursday that India is being looked at “as a trusted country" and that “trust will outweigh any of the negative impacts".

Spokespersons of the ministry of commerce and industry, and the ministry of finance didn’t respond to emailed queries.

A matter of deficit

Trade talks loom amid Trump’s threats to hike tariffs on imports from several countries. Notably, the US has not named India in its America First trade policy unveiled on 20 January, which mentions Mexico, Canada and China.

Dates for the trade talks between India and the US have not been fixed yet, but trade is certain to top the agenda of any upcoming bilateral engagement as Trump in his second term sets about reducing the country’s trade deficit with several nations.

To be sure, the US had a merchandise trade deficit of $35.32 billion with India in FY24. India’s merchandise exports to the US last fiscal amounted to $119.72 billion, with exports at $77.52 billion and imports at $42.20 billion, according to data from the commerce ministry.

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During the April-November period of FY25, India exported merchandise worth $52.9 billion to the US, and imports were worth $29.6 billion.

The US remains one of India’s largest trading partners. While it serves as India’s top export market, US imports currently lag those from China, Russia, and the UAE.

Trump on Tuesday said a 10% tariff on Chinese goods was under consideration. While there are fears of Washington upending global trade, higher tariffs on Chinese goods may also create an opportunity for India. Unlike China, India has a most favoured nation (MFN) status with the US.

Trump has also vowed higher tariffs on imports from the European Union, Canada and Mexico. He has directed the US Commerce and Treasury Departments to investigate the causes of the US’s large annual trade deficits in goods, while also pitching for the creation of a new External Revenue Service (ERS) aimed at collecting tariffs from foreign governments.

The FTA angle

“While India must avoid rushed decisions, like increasing oil imports from the US, and instead highlight the unrestricted access American digital firms enjoy in its market, any policy changes should prioritize national interests over speculative US demands, emphasizing patience and strategic foresight," said Ajay Srivastava, founder of trade thinktank Global Trade Research Initiative (GTRI). “If Indian goods or services are targeted, India must respond firmly—something it has successfully done before."

Srivastava added that the US could gain better access to the Indian market through a free trade agreement (FTA), just as India has done with the Asean, Japan, and South Korea. “However, in an FTA, tariff cuts must be by both sides, and the US is reluctant to lower its tariffs to protect domestic industries," he added.

Exports under cloud

Meanwhile, Indian exports to the US could also be in for some churn. Jitendra Srivastava, CEO of Triton Logistics & Maritime, a global freight forwarding company, said that Indian exporters are likely to encounter higher tariffs on a range of goods, including automobiles, textiles, and pharmaceuticals, as a result of the America First policy.

“This agenda prioritizes safeguarding domestic industries through protectionist measures, which could have a detrimental effect on India’s key export sectors, making it more difficult for these products to remain competitive in the US market. Such barriers could significantly impact trade volumes and reduce India’s export revenues in these categories," he said.

Ajay Sahai, director-general of the Federation of Indian Export Organisations, said it was unclear if the US administration is considering an across-the-board tariff or a country-specific one. “An across-the-board tariff would apply evenly in global competition, while a country-specific tariff would require analysing its impact on competitors, Indian goods, and potential trade shifts. A decision on the matter is yet to be made," he said.

“The imposition of 100% tariff on Brics nations appears to be a signal directed primarily at Russia, Brazil, and China, particularly Brazil and China, as about 30% of their trade is conducted in their local currencies. While this might indirectly signal India due to its membership in Brics, India’s local currency exports constitute less than 1% of its total trade," said Sahai.

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