Indian policymakers believe that the country remains vulnerable to future tariff hikes, making formal negotiations with the US Trade Representative (USTR) office crucial to securing an exemption, the people said, speaking on the condition of anonymity.
India, which has a $35-billion trade surplus with the US, escaped tariffs in the first round even as Trump imposed a 25% duty on Mexico and Canada (10% on Canadian energy). While Canada slapped counter-tariffs, Mexico on Monday reached a deal with the US to delay tariffs. Trump also increased tariffs on Chinese imports by 10%.
New Delhi is preparing a list of goods to present to the US administration to highlight their impact on American exporters, said the first of the three people cited earlier. It’s aimed at reinforcing the argument that imposing tariffs on Indian products could also hurt US businesses, this person said.
The country is emphasizing its role as a key trade partner, particularly in sectors such as pharmaceuticals, information technology services, engineering goods and leather products, which contribute significantly to US supply chains, the second person said.
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While India’s merchandise exports to the US saw a marginal dip to $77.52 billion in FY24, primarily due to supply chain disruptions, the long-term trend remains positive. The shipments rose to $78.31 billion in FY23 from $75.60 billion in FY22.
Key exports include engineering goods, electronic products, gems and jewellery, drugs and pharmaceuticals, petroleum products, textiles, marine products, leather and leather-manufactured goods and spices.
Queries emailed on Sunday to the USTR office and India’s commerce ministry seeking details on proposed discussions remained unanswered.
The emailed response by U.S. Embassy in New Delhi included a factsheet on the tariff hike affecting imports from Canada, Mexico, and China. “I can’t share details on any private diplomatic conversations,” Embassy spokesperson Christopher Elms said.
India’s situation is different
Trade experts also suggest initiating dialogue with the Trump administration early to protect the country’s sovereignty and avoid any pre-emptive deals.
“India’s situation is different from that of Canada and Mexico, as those nations are heavily dependent on the US—a dynamic that does not apply to India,” said Biswajit Dhar, economist and distinguished professor at the Council for Social Development. “We are a fair player in the global market, and there is no reason for us to be cowed down.”
Also read | Mint Primer | Are Trump’s tariffs on China and others a boon or bane for India?
Still, he said, as the US President has fulfilled his campaign promise, it is entirely possible that India could also be targeted.
“We must initiate discussions with his administration immediately to ensure that any action taken against India does not adversely affect our interests,” said Dhar. “We cannot afford such measures to impact our exports, particularly given the concerns about our external sector highlighted in the Economic Survey. Our established bilateral forums should be activated as soon as possible.”
Budget signalling
According to the third person quoted earlier, “The duty relaxations announced in the Union Budget on certain products that may benefit US exports were a signalling tactic.”
During his previous presidency, Trump had labelled India a “tariff king” in July 2019, citing a 100% duty on Harley-Davidson imports. India later reduced this tariff to 50%, and it was further cut to 40% as announced in the Union Budget on Saturday.
For higher displacement motorcycles, the import duty on completely built units was cut from 50% to 30%. Further reductions apply when bikes are imported in semi-knocked-down or completely knocked-down versions.
According to budget documents, India eliminated import duties on specific waste and scrap items, which amounted to $2.5 billion in US exports to India in FY24. Tariffs on ground satellite installation equipment were also eliminated, which previously amounted to $92 million in US exports in FY23.
Gaining at China’s expense
The second person cited above said higher US tariffs on China would create an opportunity for the country. “India would like to tap into that opportunity, but it all depends on the next course of action by the US.”
India has become a key supplier of electronic goods—a market that was once dominated by China. From 2017 to 2023, US imports of electronics from China fell 15.4%, totalling $126.9 billion. During this period, Indian exports of electronics to the US surged 773.6% to $12.1 billion, and imports of machinery and computers from India increased by 152.5%.
Also read | No pre-emptive tariff cuts on US imports as India prepares for tricky trade dance with Trump
Ajay Sahai, director general of Federation of Indian Export Organisations (FIEO), said, “The government’s approach may centre on identifying key products where China’s exports to the US are significant and exploring alternatives. At the same time, India could seek to capitalize on new opportunities, especially in the pharmaceutical sector.”
However, Sahai said, while the US remains India’s major market, the nature of trade differs—India dominates in generic drug exports, while the US specializes in value-added pharmaceutical products.
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