India Eyes Tariff Reductions On Key US Imports To Safeguard Trade Ties And Avert Reciprocal Duties

In a move aimed at avoiding trade tensions with the United States, India is contemplating reducing tariffs on more than 30 imported goods while also boosting its purchases of American defence and energy products, according to a report by Nomura.

This decision comes as part of India’s broader strategy to maintain favourable trade relations with its largest export destination and prevent potential reciprocal tariffs from Washington, reported ANI.

India has been actively working to ease trade frictions with the US. In its recent Union Budget, the government announced reductions in import duties on various products, including electronics, textiles, and high-end motorcycles.

Additionally, diplomatic measures have been taken, such as India agreeing to repatriate over 100 illegal Indian immigrants from the US.

Now, further tariff cuts are reportedly being considered on luxury vehicles, solar cells, and chemicals, reinforcing India’s commitment to ensuring smooth trade relations.

It further warns that failure to lower tariffs on US goods could prompt Washington to impose retaliatory duties on Indian exports.

For instance, if India continues to impose a 25 per cent tariff on American automobiles, the US could respond with a matching tariff on Indian vehicle exports.

Former US President Donald Trump has been particularly vocal about India's trade policies, previously branding it the "tariff king" and advocating for "reciprocal tariffs" to ensure a level playing field for US exports.

India’s trade surplus with the US has been expanding in recent years, reaching nearly USD 38 billion in 2024.

Key exports from India to the US include industrial machinery, pharmaceuticals, gems and jewellery, fuels, iron and steel, textiles, vehicles, and chemicals.

Given that the US accounts for nearly 18 per cent of India’s total exports, making up approximately 2.2 per cent of India’s GDP in FY24, any escalation in trade disputes could have significant economic implications.

To safeguard its trade interests, India is exploring avenues for an amicable resolution with Washington.

In the medium term, it is also focusing on strengthening economic ties with the US while attracting more American supply chains to establish operations in India.

A crucial meeting between Prime Minister Narendra Modi and US President Donald Trump is scheduled for Friday this week in Washington, where trade and tariff-related concerns are expected to be high on the agenda.