Mint Explainer: Will tariff reductions and a trade treaty with the US harm India?

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Subscribe to enjoy similar stories. India and the United States agreed to negotiate the first tranche of a mutually beneficial multi-sector bilateral trade agreement (BTA) by late September after president Donald Trump threatened to impose reciprocal tariffs on goods from India and several other countries. As he did in his first term, Trump continues to pressure India to lower its high and protectionist import duties on several goods, including luxury goods.

India has made some concessions recently by reducing the duties on Harley Davidson motorcycles and bourbon whiskeys. Trump wants more, he wants trade between India and the US to be more balanced. In calendar 2024, India exported goods worth $87.4 billion to the US and imported goods worth $41.8 billion, leaving the US with a $45.7 billion trade deficit.

Trump wants that to be narrowed. He wants India to buy more petroleum oil, natural gas and defence equipment from the US. Also read: India was first-time lucky with Trump's tariffs. But it doesn't want to take a chance During prime minister Narendra Modi’s recent visit to the US, the two leaders agreed to work towards growing bilateral trade to $500 billion by 2030.

It remains unclear if the Trump administration will impose reciprocal tariffs even as negotiations for BTA are underway. But it is amply clear that Trump is determined to play tough this time. Meanwhile, on 18 February, Trump announced about 25% tariffs on imported cars, pharmaceuticals and semiconductors.

This comes after the 25% tariff announced on steel and aluminium. Mint examines if these tariffs and trade agreements will be detrimental to India’s interests. India is among the top 10 sources of goods imported into the US.