India recently announced a reduction in import duties on motorcycles, lowering tariffs on larger bikes with engines over 1,600cc from 50% to 30%, and on smaller bikes from 50% to 40%. This move aims to ease the entry of Harley Davidsons into the Indian market and preempt any potential tariff threats. The United States exported $3 million worth of motorcycles to India last year.
Amid escalating global trade tensions, US President Donald Trump has been implementing trade measures against various countries, including allies like Canada and Mexico, as well as major competitors such as China. While India hopes its tariff cuts will appease Trump, there are concerns about the possibility of further trade actions. Ajay Srivastava, founder of the Global Trade Research Institute in Delhi, warns that if Trump has targeted countries like Canada and Mexico, India could also face similar actions.
During a recent phone call, Trump emphasized the need for India to increase its purchases of US arms and address trade imbalances. Throughout his first term, Trump criticized India’s high tariffs, particularly the 100% duty on Harleys. Trump labeled India as a “tariff king” and accused the country of unfair trade practices.
Despite these challenges, India maintains a trade surplus with the US, its top trading partner. Bilateral trade exceeded $190 billion in 2023, with substantial growth in exports to the US. In addition to motorcycles, India has eliminated import taxes on various products like satellite ground installations, synthetic flavoring essences, and fish hydrolysate for aquatic feed, benefiting US exporters.
While Trump’s critiques of India’s tariff policies persist, the recent tariff reductions signal a shift in India’s trade strategy to boost US exports in different sectors. Amid a tense global trade environment, India is taking steps to facilitate trade across technology, automobiles, industrial goods, and waste imports.
India’s diverse export portfolio includes textiles, pharmaceuticals, engineering goods, petroleum oils, machinery, diamonds, smartphones, auto parts, seafood, gold jewelry, and iron and steel products. This broad range of exports underscores India’s significant role in global trade and its strong trade relationship with the US.
Over the years, India has transitioned from being one of the most protectionist economies to embracing more open trade policies. By reducing tariffs and expanding its export base, India aims to enhance its position in the global marketplace and foster mutually beneficial trade relationships.
In the backdrop of global economic shifts and trade tensions, India finds itself navigating a complex terrain to safeguard its interests while fostering international partnerships. The evolution of India’s trade policies over the past few decades reflects a delicate balance between self-reliance and global integration.
Aseema Sinha’s insights shed light on India’s journey towards industrialization, emphasizing a period characterized by a push for self-sufficiency, wariness of global ties, and a cautious approach to exports. The turning point came in the 1990s and 2000s, when India embarked on a path of liberalization, slashing its average tariffs significantly from 80% in 1990 to 13% in 2008. This move signified India’s willingness to embrace international trade and open its doors to foreign investment.
However, recent developments under Prime Minister Modi’s “Make in India” initiative have seen a reversal in tariff trends, with rates climbing back up to around 18%, surpassing those of key Asian economies like China, South Korea, Indonesia, and Thailand. This shift reflects a renewed focus on promoting domestic manufacturing and protecting local industries, even as it raises concerns about India’s competitiveness in the global market.
The specter of protectionist policies looms large, particularly in the context of President Trump’s “America First” agenda. Trade expert Biswajit Dhar warns of India being targeted under this framework, citing the need for reciprocal actions in response to import duties and trade imbalances with the US. Agriculture emerges as a contentious issue, with market access remaining a point of contention between the two nations.
In a bid to defuse tensions, India made concessions by reducing tariffs on select US agricultural products like almonds, apples, chickpeas, lentils, and walnuts in 2023. However, expectations loom of further demands from the US, potentially straining the delicate balance of trade negotiations. The domestic political landscape, especially concerning farming communities, adds another layer of complexity to India’s stance on trade talks.
Despite these challenges, India’s strategic alliance with the US within the Quad framework offers a glimmer of hope in navigating the choppy waters of global trade dynamics. The shared objective of countering China’s influence underscores the importance of fostering strong ties between the two nations. Additionally, India’s cooperation on issues like deporting undocumented Indian migrants from the US signals a willingness to engage constructively on mutual concerns.
The personal rapport between Prime Minister Modi and President Trump serves as a potential asset in smoothing over trade frictions and fostering mutual understanding. The upcoming White House visit by Prime Minister Modi, reportedly at President Trump’s invitation, holds promise for further dialogue and cooperation on key trade issues.
As India charts its course in the global trade arena, the coming months will be crucial in determining the trajectory of its economic relationships and the extent of its engagement with international partners. The delicate dance between protectionism and liberalization will continue to shape India’s trade policies, with implications that extend far
