Final week India additional slashed import duties on bikes, reducing tariffs on heavyweight bikes with engines above 1,600cc from 50% to 30% and smaller ones from 50% to 40%.
A pre-emptive transfer designed to additional smoothen the entry of Harley Davidsons into India – and, Delhi hopes, keep off any risk of tariffs. US motorbike exports to India have been price $3m final 12 months.
Donald Trump has marked his return to the White Home by brandishing commerce measures towards America’s neighbours and allies in addition to its large rival China.
India hopes it’s forward of the sport – however will its tariff cuts fulfill Trump, or is commerce motion nonetheless on the desk?
“Canada and Mexico are actually two arms of the US. If he has acted towards them, he might simply act towards India too,” says Ajay Srivastava, founding father of the Delhi-based assume tank International Commerce Analysis Institute (GTRI).
Of their telephone dialog late final month, the US president pressed Prime Minister Narendra Modi to purchase extra US arms and for there to be a fairer commerce stability, protecting the strain on.
And through his first time period, Trump fixated on India’s steep tariffs. He repeatedly slammed the then 100% responsibility on Harleys as “unacceptable”, making it a rallying level in his campaign towards what he noticed as unfair commerce practices.
Previously he repeatedly branded India a “tariff king” and a “large abuser” of commerce ties.
India enjoys a commerce surplus with the US, its prime buying and selling companion. Bilateral commerce crossed $190bn (£150bn) in 2023. Merchandise exports to US have surged 40% to $123bn since 2018, whereas providers commerce grew 22% to succeed in $66bn. In the meantime, US exports to India stood at $70bn.
However past bikes, India has zeroed out import taxes on satellite tv for pc floor installations, benefiting US exporters who provided $92m price in 2023.
Tariffs on artificial flavouring essences dropped from 100% to twenty% ($21m in US exports final 12 months), whereas duties on fish hydrolysate for aquatic feed fell from 15% to five% ($35m in US exports in 2024). India additionally scrapped tariffs on choose waste and scrap gadgets, a class the place US exports amounted to $2.5bn final 12 months.
Prime US exports to India in 2023 included crude oil and petroleum merchandise ($14bn), LNG, coal, medical gadgets, scientific devices, scrap metals, turbojets, computer systems and almonds.
“Whereas Trump has criticised India’s tariff insurance policies, the newest reductions sign a coverage shift that would improve US exports throughout numerous sectors,” says Mr Srivastava.
“With key tariff cuts on expertise, vehicles, industrial and waste imports, India seems to be taking steps in the direction of facilitating commerce whilst the worldwide commerce setting stays tense.”
In the meantime India’s exports span a various vary – from textiles, prescribed drugs and engineering items to petroleum oils, equipment and minimize diamonds. It additionally ships smartphones, auto elements, shrimp, gold jewelry, footwear and iron and metal, making it a key participant in international commerce.
“This numerous vary of merchandise displays India’s broad export base and its sturdy commerce relationship with the US,” says Mr Srivastava.
India was as soon as among the many world’s most protectionist economies. Within the Nineteen Seventies, American political scientist Joseph Grieco described it as having one of many “most restrictive, cumbersome… regimes regulating international direct investments”.
This inward-looking strategy led to a gentle decline in India’s export share of world commerce, from 2.42% in 1948 to only 0.51% by 1991. As Aseema Sinha, writer of Globalizing India: How International Guidelines and Markets are Shaping India’s Rise to Energy, noticed, this era was marked by “a self-driven industrialisation drive, export pessimism, and suspicion of world alliances”.
India lastly opened up within the Nineteen Nineties and 2000s, reducing common tariffs from 80% in 1990 to 13% in 2008.
However after Modi launched his “Make in India” coverage to spice up manufacturing in India tariffs have climbed once more to about 18% – increased than these set by different Asian nations resembling China, South Korea, Indonesia and Thailand.
Commerce professional Biswajit Dhar believes India is now a major goal beneath Trump’s “America First” coverage, which seeks reciprocal motion towards excessive import taxes and reassesses commerce with giant US deficits.
Agricultural market entry stays a sticking level for the US, he says.
India dropped retaliatory tariffs on US-made almonds, apples, chickpeas, lentils and walnuts in 2023, however Trump will probably demand extra. Nonetheless, India might maintain agency given home political sensitivity round farming.
“That is the place we’ll drive a tough discount, and issues might come up,” cautions Mr Dhar.
That stated, India’s strategic ties with the US – as a Quad member countering China – might assist ease friction. India’s willingness to just accept the deportation of undocumented Indian migrants within the US with out pushing again has additionally despatched a optimistic sign, Mr Dhar notes.
Specialists additionally level to Modi’s heat private rapport with Trump as a bonus. Some readability will come when the Indian prime minister visits the White Home – this month, in response to some reviews – at Trump’s invitation.