India’s “iron wall” built against American imports

US-India trade policies have come under scrutiny following President Donald Trump’s pledge to impose reciprocal tariffs on Indian imports, arguing that New Delhi levies significantly higher import taxes on US goods than vice versa.

At a joint press conference after Prime Minister Narendra Modi’s recent visit to Washington, Trump announced that India would purchase F-35 fighter jets and oil and gas from the US, while both nations would also begin negotiations to address the US trade deficit with India. With India facing an economic slowdown and declining demand, according to an article by Al Jazeera, these negotiations and major purchases could place additional strain on its already fragile economy.

India’s economy is projected to grow at just 6.4% in the fiscal year ending March, marking its slowest expansion in four years. In response, the Modi government introduced tax relief measures for the middle class in its latest annual budget to stimulate economic activity. 

Despite the US being India’s largest trade partner as of 2024, India only ranks tenth among US trading partners. However, bilateral trade between the two nations reached a record high of $129.2 billion in 2024, reflecting growing economic ties. The trade deficit between the US and India continues to expand, with the US importing $45.7 billion more from India than it exported in 2024. Indian imports made up approximately 2.7% of all US imports last year. Trump has frequently criticized Modi’s tariff policies, but India has shown signs of relaxing its levies.

Earlier this month, India’s finance minister reduced the import duty on motorcycles, a move benefiting Harley Davidson, though Trump has previously objected to the fact that the company had to establish a factory in India to circumvent the high tariffs. The US primarily imports pearls, semi-precious stones, pharmaceuticals, and electrical equipment from India, with the top five categories of imports totaling over $47 billion in 2023.

India, in turn, imports crude oil, gems, nuclear reactors, and medical and electrical equipment from the US. Trump recently reiterated his grievances about India’s high tariffs during a joint interview with Tesla CEO Elon Musk. He claimed that it was “practically impossible” for Musk to sell cars in India, to which Musk quickly interjected, confirming that the country imposes a “100% import duty.”

In reality, India applies a 15% import duty on EVs priced above $35,000, subject to specific conditions. Ahead of the 2024 elections, India introduced a new EV policy that reduced import duties for manufacturers willing to set up production facilities within a set timeframe in India. This move was widely seen as an attempt to attract Tesla, but Musk instead opted to deepen his business operations in China rather than expand into the Indian market. 

By Nazrin Sadigova