On April 2the Trump administration levied a 26% tariff on Indian importsalongside similar tariffs targeting most U.S. trading partners. A week later, the U.S. paused those tariffs for 90 days, but a blanked 10% tariff and a separate 25% duty on steel, aluminum, and automobiles remain in effect.
Anticipating the escalation, New Delhi pre-emptively lowered duties on several U.S. exports, including Harley-Davidson motorcycles and bourbon whiskeywhile offering broader tariff cuts on more than half of its $23 billion in U.S. imports. The move reflects India’s intent to preserve trade with its top export partneras bilateral trade with the U.S. hit $129 billion in 2024including a $45.7 billion surplus in India’s favor.
However, Indian sectors like gems and jewellery, electronics, seafood, and auto parts remain vulnerable to further U.S. tariff hikes. On the other hand, textiles and apparel may benefit as China, a major competitor, faces a 145% U.S. tariff.
While China is extending an olive branch, urging India to “stand together” against Trump’s protectionism, India remains cautious. Despite improved diplomacy since their 2020 border clashes, New Delhi continues to block Chinese investment in sensitive sectors like electric vehiclesciting national security concerns—while welcoming proposals from companies like Tesla. India’s $100 billion trade deficit with China and longstanding regional rivalry limit the scope of closer economic cooperation.
Domestically, Trump’s tariff offensive has revived conversations around economic liberalization. While India has dramatically lowered its average tariff rate from nearly 79% in 1990 to just over 12% in 2023key sectors like agriculture and automobiles remain heavily protected. Trump has publicly criticized India as a “tariff king,” and Western governments, including the EU, are pushing for more open access—especially for sectors like European cars.
In response, India is aiming to finalize a bilateral trade deal with the U.S. by fall 2025aligning with Trump’s expected visit to New Delhi for the Quad Leaders’ Summit. The agreement is expected to improve market access, streamline non-tariff barriers, and include strict rules of origin to prevent tariff circumvention. Still, India’s agriculture sector remains a political minefield, with past reform attempts triggering nationwide protests in 2020.
Meanwhile, Canada risks being left behind. Though both Liberal leader Mark Carney and Conservative leader Pierre Poilievre have voiced interest in a Canada-India trade dealtalks have stalled since diplomatic tensions flared in September 2023. With India expanding its trade ties with the U.S., U.K., EU, and New ZealandCanada’s lack of a deal leaves its exports—such as lentils—subject to WTO-level tariffs, now up to 10%under India’s self-reliance strategy.
India-U.S. Trade Agreement by Fall 2025
A first-phase deal is expected to address market access and tariff reductions, aiming to advance India’s “Mission 500” goal of reaching $500 billion in bilateral trade by 2030.
Canada Faces Pressure to Resume Trade Talks
With other nations racing ahead in securing bilateral agreements, Canada must re-engage diplomatically or risk falling behind in the race for access to India’s growing consumer base.
As India navigates Trump’s tariff storm, its approach reflects strategic patience: open where it must, protective where it canand always calculating how to sustain economic momentum without compromising sovereignty or domestic stability.
Subscribe to get the latest posts sent to your email.
