The trade relationship between India and the United States has grown significantly over the past two decades, with the US emerging as India’s largest trading partner. Bilateral trade reached a record high of $119.7 billion in 2024, reflecting deepening economic ties. However, as negotiations intensify ahead of US President Donald Trump’s April 2, 2025, tariff deadline, concerns over tariffs, market access, and trade imbalances continue to shape discussions.
India-US Trade: A Snapshot
In FY 2024, India recorded a trade surplus of $35.3 billion with the US, with exports at $77.5 billion and imports at $42.2 billion. The key sectors driving trade included:
India’s Exports to the US
| Category | Export Value (USD) |
|---|---|
| Engineering goods | $17.6 billion |
| Electronics | $10 billion |
| Gems and Jewellery | $9.90 billion |
| Pharmaceuticals | $6.72 billion |
| Petroleum products | $5.83 billion |
| Ready-made garments (RMG) and accessories | $4.71 billion |
India’s Imports from the US
| Category | Import Value (USD) |
|---|---|
| Mineral fuels and oils | $12.9 billion |
| Pearls and semi-precious stones | $5.16 billion |
| Nuclear reactors and boilers | $2.81 billion |
| Electrical machinery and equipment | $2.02 billion |
Beyond trade, the US remains a major investor in India, with cumulative Foreign Direct Investment (FDI) inflows from the US totalling $67.76 billion. Similarly, Indian companies have invested over $40 billion in the US, creating 425,000 direct jobs.
The Climate of Uncertainty
Despite strong economic ties, uncertainty looms over trade negotiations, largely due to Trump’s unpredictable rhetoric on social media and disagreements on tariff structures. Trump has claimed that Indian tariffs on American cars exceed 100%, while Indian officials assert that duties on cars like Tesla have been lowered to 15%.
This discrepancy highlights a fundamental challenge: both nations have starkly different interpretations of trade barriers and market access issues. Moreover, with Trump pushing for a Singapore-style Free Trade Agreement (FTA) with India—where the import duty on cars is just 2.5%—Indian negotiators will likely face significant pressure to lower tariffs.
The key question is: Will India be able to push back, or will it have to make concessions under the threat of immediate retaliatory tariffs?
Ongoing Negotiations: What’s at Stake?
India’s Ministry of External Affairs (MEA) has confirmed that active trade negotiations are underway to:
- Expand US market access for American agricultural products, industrial goods, and medical equipment.
- Address India’s concerns over US restrictions on steel, aluminium, and visa policies.
- Seek restoration of India’s Generalized System of Preferences (GSP) benefits, which were revoked by the Trump administration in 2019.
Possible Outcomes: Deal or Trade War?
With the April 2, 2025, deadline fast approaching, there are three possible scenarios:
- Successful Agreement: India and the US reach a compromise, lowering select tariffs and possibly restoring GSP benefits.
- Limited Deal with Further Talks: A partial agreement is signed, but contentious issues remain unresolved.
- Tariff Standoff: Talks collapse, triggering additional US tariffs on Indian goods, prompting retaliatory tariffs from India.
Looking Ahead: Can Trade Ties Overcome Political Uncertainty?
India and the US are projected to reach $300 billion in bilateral trade by 2026-27, with American firms expanding their presence in India and Indian students contributing $7.7 billion annually to the US economy. However, the road to a mutually beneficial trade deal remains fraught with challenges.
With Trump’s tough stance on tariffs and India’s need to protect its domestic industries, the next few weeks will be crucial in determining whether both nations forge a stronger trade partnership or head toward another economic standoff.
All views expressed are personal. This article is authored by Anindita Chatterjee, a Partner at TCN Global.
