India - US Trade Relations : What Lies Ahead After Trump's Return to Power
The inauguration of the Trump administration in 2025 marks a clear and promising shift in India-US trade relations fostering new opportunities for collaboration and growth. On January 21, 2025, Trump announced that the US is considering imposing a 10% punitive levy on Chinese goods following his election victory in his inaugural address. This is a fantastic opportunity for India to leverage this situation in her favour to negotiate favourable trade deals and counterbalance China’s hold on global trade.
However, the intergovernmental group BRICS, including 10 countries, have been warned not to create a BRICS currency. The new president of the US asserted that any efforts by the BRICS countries to abandon the dollar would not be accepted and that their trade with the US would be subject to a 100% tariff. The good news here is that Indian External Affairs minister S. Jaishankar affirmed India’s stance stating that there were no proposals for ‘de-dollarisation.’
India’s trade balance with the United States shows double figures because the US ranks as its top trading partner. India exports engineering goods, electronic products, gems and jewelry, pharmaceuticals, light crude oil and electrical equipment to the US market. Further, India exported 7,346 commodities to the US in FY24 leading to $77.5 billion.
However, despite China being one of the biggest exporters to the US, Trump is eager to work with India on a mutually beneficial trade deal. At this point, we must figure out how to balance our trade ecosystem with the US if it is subject to any kind of tariff as well. At present, only time will tell what unfolds between the two countries. The US is India’s biggest market for both merchandise and services trade.
The US ranks 3rd largest investor in India with cumulative inflows of $709.04 billion in FDI from April 2014 – March 2024. The two countries recently settled seven out of the pending WTO disputes that existed between them including tariffs on aluminum and steel imports. They have also cooperated in all important areas of technology and innovation, such as agriculture, blockchain, clean energy, cyber sciences, future-generation telecommunications, health security, and space.
America-First Policy
Trump’s America first policy will have an impact on bilateral trade relations between the US and India. However, unlike China, India’s trade relationship with the US is favorable, which makes the US a vital source of foreign exchange. To increase economic integration and cooperation in the Indo-Pacific, there is an agreement called IPEF (Indo-Pacific Economic Framework ) in which the US and India are also members. India is a signatory to three pillars of the IPEF: supply chains, clean economy, and fair economy. After Trump 2.0, many agreements like this would take a different shape.
For the time being, India will turn on the US government for guidance on new policies that will impact their commercial relations. India is reportedly examining the ‘America First’ trade policy memorandum and will make a decision regarding the best course of action. If you are a business considering import and export, collaborate with a trusted international trade and commerce company for end-to-end solutions.
