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How India can dodge Donald Trump's tariff tantrum.


Date: 24-01-2025
Subject: How India can dodge Donald Trump's tariff tantrum
In December last year, US President Donald Trump had said India charges "a lot" of tariffs, reiterating his intention to impose reciprocal tariffs in retaliation for what New Delhi imposes on the import of certain American products. Now with Donald in the White House the threat of tariffs looms large over India.


The US is the largest trading partner of India and India enjoys a trade surplus with it. In 2023-24, India's exports stood at $77.51 billion, while imports aggregated at $42.2 billion in the last fiscal. During April-December this fiscal, the country's exports to America rose by 5.57 per cent to about $60 billion, while imports grew by about 2 per cent to $33.4 billion. The US has in the past raised issues of high import duty on Harley Davidson and limited market access to medical devices and eq ..

Indian and US diplomats are trying to arrange a February meeting between Prime Minister Narendra Modi and Trump in Washington, sources told Reuters. However, it's not certain the leaders will meet in February. Sources said a bilateral meeting was possible later in the year, including when leaders of the Quad grouping of India, Australia, Japan, and the U.S. meet at an annual summit hosted by India.

Indian officials are considering a limited trade deal with the US under one of its scenarios, people familiar with the matter have told Bloomberg recently. The plan under discussion would include reducing some “most-favored nation” tariffs, which are imposed on countries with which India doesn’t have a bilateral trade deal.


Reuters had reported last month that India is preparing to offer tariffs cuts on some farm and other goods mainly imported from the US, aiming to clinch a broader trade and investment deal once Trump takes charge. To tackle Trump's threat of a "reciprocal tax" on Indian goods for high tariffs, some officials of the Indian commerce ministry are ready to consider cuts on certain products such as pork, a senior government source said. Currently India slaps about a 45% import tariff on pork, which is mostly supplied by the US. Tariffs could also be reduced on high-end medical devices such as pace makers and luxury motor-cycles, including Harley Davidson, said a second official with direct knowledge of trade issues, citing the 25% to 60% tariffs on these products. To address Trump's concerns over the trade imbalance, officials have also proposed buying more LNG and defence equipment from the US, as source told Reuters.

"That is an opportunity," Arvind Virmani, a government adviser and member of the state-run policy think-tank NITI Aayog, told Reuters. "It is in the interest of the U.S. and India that more of critical manufacturing or the sensitive manufacturing be done in India rather than China," he said, adding a "preferential trade cum investment deal," which is more ambitious than an earlier proposed mini-trade deal, would benefit both countries.


Starting over where India-US left off last time
During Trump's first term, a proposed mini-trade deal aimed at addressing trade imbalances and strengthening trade ties through limited agreements faltered over disagreements on tariffs, market access and intellectual property. The Biden administration is also not in favour of a free trade agreement. India is now seeking a broader deal, Reuters reported, offering significant concessions including production-linked incentives for ..

Kenneth I. Juster, a distinguished fellow at the Council on Foreign Relations, and Mark Linscott, a senior advisor at the U.S.-India Strategic Partnership Forum and the Asia Group, have written in 'Foreign Policy' that This time around, Modi and Trump should seize the opportunity to strike a substantial bilateral agreement.

"The United States and India both want to enhance their economic influence in the Indo-Pacific region and blunt China’s economic primacy. The time is ripe and the incentives are in place for these two leaders to beat the odds and make a major deal."

 Source Name : Economic Times

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