India’s tariffs a ‘big problem’; US sale of oil & gas will bridge trade deficit: Trump

“India imposes a 30, 40, 60 and even 70 per cent tariff on so many goods, and in some cases, far more than that. As an example, a 70 per cent tariff on US cars going into India makes it pretty much impossible to sell those cars. Today, the US trade deficit with India is almost $100 billion, and Prime Minister Modi and I have agreed that we will be negotiating to address the long-running disparities,” Trump said at the India-US briefing.

“We want a certain level playing field, which we really think we’re entitled to, and he does also, in fairness. So we’re going to work on that very hard, and we can make up the difference very easily with the deficit, with the sale of oil and gas, LNG, of which we have more than anybody in the world,” Trump said.

Trump further stated that India and the US have reached an important agreement on energy that will restore the United States as a leading supplier of oil and gas to India.

“India is also reforming its laws to welcome the US to nuclear technology at the highest level into the Indian market. This will bring safe, clean and affordable electricity to millions of Indians and tens of billions of dollars to the US civilian nuclear industry in India,” he said.

India’s goods trade surplus with the US doubled in five years

India’s goods trade surplus with the US has been rising, particularly after the COVID-19 pandemic, doubling from $17.30 billion in 2019-20 to $35.33 billion in 2023-24, alongside a notable shift in the export basket. While exports of electronic and engineering goods surged, traditional exports such as gems & jewellery and garments remained largely unchanged.

The most significant transformation has occurred in electronics exports, driven in part by tariffs imposed by the US during Trump’s first term.

A report from Oxford Economics last year examined the impact of the US-China trade war during Trump’s first term, highlighting that US trade rerouting was particularly pronounced in the large electronics market, where China’s share had dropped by 19 percentage points since 2017.

“India’s share in US electronics imports has risen nearly tenfold since then, reaching 2.1 per cent. Electronics now also account for a greater share of India’s overall exports, indicating that the government’s ongoing efforts to become a high-tech powerhouse have partly paid off,” the report stated.

India’s imports from the US concentrated in five items

India’s imports from the US over the past five years have grown at a slower pace compared to its exports. US exports to India reached $42.19 billion in 2023-24, up from $35.81 billion in 2019-20, with the bulk concentrated in five categories: mineral fuels (the largest segment), followed by precious and semi-precious stones, nuclear reactors, electrical machinery, and aircraft and parts.

While most items imported from the US do not attract high tariffs—duties on the top 30 imported goods, including crude oil, LNG, coal, diamonds and aeroplanes, range from 0 per cent to 7.5 per cent—high-end cars and motor vehicles have historically been subject to higher basic customs duty (BCD). However, these rates were reduced in the Union Budget.

In the automobile sector, India has lowered tariffs on motorcycles based on engine capacity. The tariff on motorcycles with an engine capacity below 1,600cc has been reduced from 50 per cent to 40 per cent, while for those above 1,600cc, it has been slashed from 50 per cent to 30 per cent.

Notably, US motorcycle exports to India stood at $3 million in FY2024, and this tariff cut could help expand market access for American manufacturers, according to the think tank Global Trade and Research Institute (GTRI).