As Donald Trump returns to the White House, India’s government is actively strategizing to mitigate potential trade friction, with officials exploring a range of options from increased imports to targeted tariff reductions, Bloomberg reports.
The moves come as the US-India trade surplus, which currently sits at $35.3 billion, is expected to draw scrutiny from the new Trump administration.
Sources familiar with the matter, who asked not to be named due to the private nature of the discussions, have revealed that the Narendra Modi-led administration is analyzing various scenarios to counter any US moves aimed at narrowing the trade gap. The US was India’s largest trading partner for the year ending March 31, according to Indian commerce ministry data.
One potential approach under consideration is to significantly increase purchases of American goods, specifically targeting sectors such as whiskey, steel, and oil. Indian officials are also exploring reducing import tariffs, with a list of likely products, such as bourbon whiskey and agricultural goods like pecan nuts, being drafted. Notably, there is also consideration to reduce tariffs on imports from US states considered politically significant for the Republican party, highlighting a strategic approach to appease the Trump administration.
These actions are part of a broader strategy to avoid confrontation with the US while also capitalizing on potential shifts in the global trade landscape. India is also set to take back at least 18,000 undocumented Indian immigrants from the US, in a further effort to placate the Trump administration.
While the plans have not been finalized, officials are also considering the possibility of a limited trade deal with the US – a measure India had previously pursued during Trump’s first term without success. This agreement would involve reducing “most-favored nation” tariffs, which are levied on nations that don’t have bilateral trade deals with India.
Specific Scenarios Under Consideration:
- Increased Imports: India is exploring the purchase of more goods from the US, including soybeans, dairy products, vehicles, medical instruments, and aircraft.
- Targeted Tariff Reductions: Import duties could be lowered on specific goods like bourbon whiskey and agricultural products.
- Strategic Tariff Adjustments: Duty reductions could be applied to goods from US states that are politically important for the Republican party.
- Limited Trade Deal: Negotiating a trade deal that would involve reducing “most-favored nation” tariffs.
- Benefiting from US-China Tensions: If the US imposes higher tariffs and technology restrictions on China, Indian industries, particularly in electronics, hi-tech machinery, textiles, footwear, and chemicals, could benefit.
- Cross-the-board Tariffs: A blanket tariff of 10-20% imposed by all countries could potentially boost India’s exports in sectors like auto components and metals.
Furthermore, India anticipates that the new Trump administration will put pressure on issues such as data regulations, intellectual property rules, and e-commerce.
