How will India navigate trade in the Trump 2.0 era?

PM Modi's visit may ease tensions, but a lasting solution remains uncertain. With billions in trade at risk, the coming months will test US-India relations in a high-stakes economic standoff. Many countries welcomed Donald Trump's return to the White House but are now bracing for economic turbulence. For India, the primary concern is tariffs. Trump aims to impose new tariffs—taxes on imported goods—on a "reciprocal" basis, targeting countries with high tariffs on US exports. With billions at stake, Prime Minister Narendra Modi is heading to Washington to keep India's exports flowing and to prevent a trade war.
KEY FACTS:
The US was India's top trade partner in 2024, but India ranks tenth for the U.S.
The US trade deficit with India doubled from $24 billion in 2020 to around $46 billion in 2024.
While India has made concessions—lowering tariffs on some items in its recent budget—Trump's administration remains focused on levelling tariff rates.
India is negotiating larger liquefied natural gas (LNG) purchases from American suppliers.
India's average tariffs dropped from 80 percent in 1990 to 13-14 percent today.
WHY IT MATTERS
Trump plans to sign an order requiring U.S. tariffs to match the tax rates imposed by other countries. "It's time to be reciprocal," he told reporters on Monday. This policy could significantly impact countries with higher tariffs on American goods, including India.
During Trump's first term, he revoked India's preferential trading partner status and raised tariffs on steel and aluminium—a proposed 25 percent tariff on global steel and aluminium imports. Nearly $2 billion of Indian steel exports and $270 million in aluminium exports could be affected. Additional tariffs on cars, chemicals, and other goods are also under discussion.India has already cut duties on items like Harley-Davidson motorcycles, a nod to Trump's past demands. Further tariff reductions on electronics, medical equipment, and chemicals are being considered. However, lowering tariffs could strain India's slowing economy, making Modi's challenge a delicate balancing act—maintaining favourable trade relations with the US while protecting domestic industries.A LOOMING TRADE WAR
In 2024, the US imported the bulk of its goods from Mexico, China, and Canada, each sending over $400 billion worth of products. The US also remains the world's second-largest steel importer, heavily reliant on Canada, Brazil, and Mexico. Europe, a key US ally, has already signalled possible retaliation if new tariffs are enforced.
Trump's return has also shifted global perspectives. A survey across 11 EU nations, Ukraine, Switzerland, and the UK found that most now view the US as a "necessary partner" rather than a close ally.
WHAT'S DRIVING TRUMP'S TARIFF PUSH?
The US has run a trade deficit of at least $500 billion since 2017, buying more from other countries than it sells. Trump sees this as a justification for his aggressive trade policies. His 2017 tax overhaul expires this year, and without new legislation, tax rates will rise, leading to fiscal tightening.
WHAT'S NEXT FOR INDIA?
Modi's visit may ease tensions, but a lasting solution remains uncertain. With billions in trade at risk, the coming months will test US-India relations in a high-stakes economic standoff.