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Journalism of Courage
Amid a whirlwind of US tariff threats, adding uncertainty to global trade, Prime Minister Narendra Modi is set to meet US President Donald Trump in an effort to avert a tariff war and maintain market access to the largest export destination for a range of Indian goods—from labour-intensive products such as garments to capital-intensive goods like electronics and engineering products.
With basic customs duty (BCD) cuts introduced on more than two dozen items in the Union Budget, the average customs duty has been reduced from 11.66 per cent to 10.66 per cent. This signals the government’s willingness to shed India’s image as a high-tariff economy. However, further reductions may be necessary, as just hours before meeting Modi, Trump announced reciprocal tariffs on all countries.
India’s imports from US concentrated in 5 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 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).
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.
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India’s goods trade surplus with US doubled in 5 years
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| Year | Exports to US |
Imports from US
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Trade surplus | ||||||
| 2023-24 | 77.52 | 42.19 | 35.33 | ||||||
| 2022-23 | 78.31 | 50.86 | 27.45 | ||||||
| 2021-22 | 75.6 | 43.31 | 32.29 | ||||||
| 2020-21 | 51.63 | 28.88 | 22.75 | ||||||
| 2019-20 | 53.11 | 35.81 | 17.3 | ||||||
| Value in $bn | |||||||||
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Source: Commerce and Industry Ministry
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Top 5 imports from US *
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Top 5 exports to US **
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*comprise 60% of total imports from US (2023-24)
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** comprise 67% of total exports to US (2023-24)
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| Items | Value ($bn) | Items | Value ($bn) | ||||||
| Mineral fuels & oils | 12.96 | Engineering Goods | 17.62 | ||||||
| Precious, semiprecious stones | 5.16 | Electronic Goods | 10.49 | ||||||
| Nuclear reactors, boilers | 3.75 | Gems And Jewellery | 9.9 | ||||||
| Electrical Machinery | 2.3 | Drugs And Pharmaceuticals | 8.72 | ||||||
| Aircrafts and parts | 2.25 | Petroleum Products | 5.83 | ||||||
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Source: Commerce and Industry Ministry
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