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India is exploring the option of reducing tariffs on over 30 items imported from the United States to prevent higher reciprocal tariffs, a move that could help maintain smooth trade relations between the two countries. According to a report by Nomura, India is also looking to increase its purchases of US defense and energy products as part of its strategy.
Key Points of India’s Trade Strategy with the US
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Tariff Reduction Plans: India is contemplating tariff cuts on products like luxury vehicles, solar cells, and chemicals, following earlier reductions on electronics, textiles, and motorcycles. These steps are part of an effort to smooth over trade tensions with the US.
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Focus on Defense and Energy: In addition to tariff cuts, India plans to increase its purchases of US defense and energy products, aiming to strengthen bilateral ties and avoid retaliatory tariffs.
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Risk of Retaliation: Nomura’s report warns that if India fails to reduce tariffs on US imports, the US may respond with similar duties on Indian exports. For example, if India imposes a 25% tariff on US automobiles, the US may retaliate with the same tariff on Indian vehicles.
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Impact on US-India Trade: The US is India’s largest export destination, accounting for about 18% of India’s total exports, which represents approximately 2.2% of India’s GDP in FY24. India’s trade surplus with the US has been rising, reaching nearly USD 38 billion in 2024. Key exports include industrial machinery, pharmaceuticals, textiles, and chemicals.
Why India is Taking Action
The ongoing trade dispute between India and the US centers around the issue of tariffs. US President Donald Trump has previously criticized India’s trade policies, calling it the “tariff king,” and has pushed for “reciprocal tariffs” to ensure fair trade.
India’s tariff rates have been higher than those of many other countries, making it vulnerable to potential retaliatory measures. To avoid this, India is actively seeking ways to negotiate and reach agreements with the US, ensuring a fair and balanced trade relationship.
Strengthening Diplomatic and Economic Ties
In addition to tariff reductions, India has been taking steps to strengthen its diplomatic relations with the US. This includes recent actions like agreeing to repatriate over 100 illegal Indian immigrants and efforts to attract more US supply chains to set up operations in India.
The trade discussions will be a key topic during Prime Minister Narendra Modi’s upcoming meeting with President Trump in Washington on Friday. The two leaders are expected to address tariff concerns and further enhance the economic partnership between the two nations.
Navigating Trade Relations with the US
India’s potential tariff cuts and the strengthening of economic ties with the US show its proactive approach to maintaining a strong trade relationship. With growing exports to the US and a commitment to enhancing defense and energy cooperation, India is working to avoid escalating trade disputes and create a balanced, fair trade environment.
