India appears to be like on nervously as Trump wields tariff menace

Last week India additional slashed import duties on bikes, chopping tariffs on heavyweight bikes with engines above 1,600cc from 50% to 30% and smaller ones from 50% to 40%.

A pre-emptive transfer designed to additional smoothen the entry of Harley Davidsons into India – and, Delhi hopes, keep at bay any menace of tariffs. US motorbike exports to India had been price $3m final yr.

Donald Trump has marked his return to the White House by brandishing commerce measures in opposition to America’s neighbours and allies in addition to its massive rival China.

India hopes it’s forward of the sport – however will its tariff cuts fulfill Trump, or is commerce motion nonetheless on the desk?

“Canada and Mexico are literally two arms of the US. If he has acted against them, he could easily act against India too,” says Ajay Srivastava, founding father of the Delhi-based suppose tank Global Trade Research Institute (GTRI).

In their cellphone dialog late final month, the US president pressed Prime Minister Narendra Modi to purchase extra US arms and for there to be a fairer commerce stability, holding the stress on.

And throughout his first time period, Trump fixated on India’s steep tariffs. He repeatedly slammed the then 100% obligation on Harleys as “unacceptable”, making it a rallying level in his campaign in opposition to what he noticed as unfair commerce practices.

In the previous he repeatedly branded India a “tariff king” and a “big abuser” of commerce ties.

India enjoys a commerce surplus with the US, its prime buying and selling associate. Bilateral commerce crossed $190bn (£150bn) in 2023. Merchandise exports to US have surged 40% to $123bn since 2018, whereas companies commerce grew 22% to succeed in $66bn. Meanwhile, US exports to India stood at $70bn.

But past bikes, India has zeroed out import taxes on satellite tv for pc floor installations, benefiting US exporters who equipped $92m price in 2023.

Tariffs on artificial flavouring essences dropped from 100% to twenty% ($21m in US exports final yr), whereas duties on fish hydrolysate for aquatic feed fell from 15% to five% ($35m in US exports in 2024). India additionally scrapped tariffs on choose waste and scrap gadgets, a class the place US exports amounted to $2.5bn final yr.

Top US exports to India in 2023 included crude oil and petroleum merchandise ($14bn), LNG, coal, medical gadgets, scientific devices, scrap metals, turbojets, computer systems and almonds.

“While Trump has criticised India’s tariff policies, the latest reductions signal a policy shift that could enhance US exports across various sectors,” says Mr Srivastava.

“With key tariff cuts on technology, automobiles, industrial and waste imports, India appears to be taking steps towards facilitating trade even as the global trade environment remains tense.”

Meanwhile India’s exports span a various vary – from textiles, prescription drugs and engineering items to petroleum oils, equipment and reduce diamonds. It additionally ships smartphones, auto elements, shrimp, gold jewelry, footwear and iron and metal, making it a key participant in international commerce.

“This diverse range of products reflects India’s broad export base and its strong trade relationship with the US,” says Mr Srivastava.

India was as soon as among the many world’s most protectionist economies. In the Seventies, American political scientist Joseph Grieco described it as having one of many “most restrictive, cumbersome… regimes regulating foreign direct investments”.

This inward-looking method led to a gradual decline in India’s export share of world commerce, from 2.42% in 1948 to only 0.51% by 1991. As Aseema Sinha, creator of Globalizing India: How Global Rules and Markets are Shaping India’s Rise to Power, noticed, this era was marked by “a self-driven industrialisation drive, export pessimism, and suspicion of global alliances”.

India lastly opened up within the Nineteen Nineties and 2000s, chopping common tariffs from 80% in 1990 to 13% in 2008.

But after Modi launched his “Make in India” coverage to spice up manufacturing in India tariffs have climbed once more to about 18% – greater than these set by different Asian nations equivalent to China, South Korea, Indonesia and Thailand.

Trade professional Biswajit Dhar believes India is now a primary goal below Trump’s “America First” coverage, which seeks reciprocal motion in opposition to excessive import taxes and reassesses commerce with massive US deficits.

Agricultural market entry stays a sticking level for the US, he says.

India dropped retaliatory tariffs on US-made almonds, apples, chickpeas, lentils and walnuts in 2023, however Trump will possible demand extra. However, India might maintain agency given home political sensitivity round farming.

“This is where we will drive a hard bargain, and problems could arise,” cautions Mr Dhar.

That stated, India’s strategic ties with the US – as a Quad member countering China – might assist ease friction. India’s willingness to simply accept the deportation of undocumented Indian migrants within the US with out pushing again has additionally despatched a optimistic sign, Mr Dhar notes.

Experts additionally level to Modi’s heat private rapport with Trump as a bonus. Some readability will come when the Indian prime minister visits the White House – this month, in accordance with some stories – at Trump’s invitation.