India increased import duties on motorcycles last week, cutting the tariffs on heavyweight bikes with engines above 1,600cc from 50 % to 30 % and smaller ones from 50 % to 40 %.
A pre-emptive action intended to bolster Delhi’s hopes of preventing any potential tariffs by more facilitating the entrance of Harley Davidsons into India. US bike imports to India last year totaled$ 3 million.
Donald Trump has launched business restrictions against both its biggest rival China and its neighbors and friends as a signal of his resumption in the White House.
India aspires to be ahead of the pack, but will Trump be satisfied by its price reductions, or is there still a need for business action?
The US’s two wings, actually, are Canada and Mexico. If he has acted against them, he could easily act against India too”, says Ajay Srivastava, founder of the Delhi-based think tank Global Trade Research Institute ( GTRI ).
The US senator pressed Prime Minister Narendra Modi to get more US weapons and for a fairer deal stability in their telephone conversation late last month, keeping the pressure on.
And during his first name, Trump fixated on India’s rough taxes. He repeatedly called the then-100 % duty on Harleys “unacceptable,” making it a pivotal moment in his fight against what he perceived as unfair trade practices.
In the past he frequently branded India a “tariff ruler” and a “big perpetrator” of business ties.
India’s major trading partner, the US, has a trade surplus. Bilateral trade crossed$ 190bn ( £150bn ) in 2023. Merchandise exports to US have surged 40 % to$ 123bn since 2018, while services trade grew 22 % to reach$ 66bn. Meanwhile, US exports to India stood at$ 70bn.
But beyond bicycles, India has zeroed out transfer taxes on satellite surface deployments, benefiting US manufacturers who supplied$ 92m value in 2023.
The cost of taxes on fish hydrolysate for aquatic feed decreased from 15 % to 5 % ($ 35 million in US exports in 2024 ), while the cost of taxes on synthetic flavouring essences decreased from 100 % to 20 % ($ 21 million in US exports last year ). India even eliminated tariffs on a few waste and waste products, which US exports totaled$ 2.5 billion last year.
Top US exports to India in 2023 included crude oil and petroleum products ($ 14bn ), LNG, coal, medical devices, scientific instruments, scrap metals, turbojets, computers and almonds.
” While Trump has criticised India’s tariff plans, the latest cuts signal a policy change that may enhance US exports across different industries”, says Mr Srivastava.
” With important tariff reductions on technology, cars, industrial and waste goods, India appears to be taking actions towards facilitating trade even as the global business environment remains anxious”.
However India’s export span a diverse range – from fabric, medicine and engineering items to gas oils, equipment and cut diamonds. It also ships smartphones, engine parts, shrimp, silver jewellery, clothing and iron and steel, making it a key player in world trade.
This wide range of products “reflects India’s large export foundation and its powerful trade relationship with the US,” says Mr. Srivastava.
India was once among the country’s most mercantilist markets. In the 1970s, American social professor Joseph Grieco described it as having one of the “most limiting, cumbersome… systems regulating foreign strong opportunities”.
This inward-looking approach led to a steady decline in India’s export share of global trade, from 2.42 % in 1948 to just 0.51 % by 1991. As Aseema Sinha, author of Globalizing India: How Global Rules and Markets are Shaping India’s Rise to Power, observed, this period was marked by” a self-driven industrialisation drive, export pessimism, and suspicion of global alliances”.
India finally opened up in the 1990s and 2000s, cutting average tariffs from 80 % in 1990 to 13 % in 2008.
However, after Modi’s” Make in India” initiative to boost manufacturing in India, tariffs have increased by about 18 %, surpassing those set by other Asian countries like China, South Korea, Indonesia, and Thailand.
According to Biswajit Dhar, a trade expert, India is now a prime target for Trump’s” America First” policy, which seeks reciprocal action against high import taxes and reviews trade with US deficits.
According to him, the US’s struggle with access to the agricultural market continues.
India dropped retaliatory tariffs on US-made almonds, apples, chickpeas, lentils and walnuts in 2023, but Trump will likely demand more. However, India may hold firm given domestic political sensitivity around farming.
” This is where we will drive a hard bargain, and problems could arise”, cautions Mr Dhar.
That said, India’s strategic ties with the US – as a Quad member countering China – could help ease friction. Mr. Dhar points out that India’s willingness to accept the deportation of undocumented Indian immigrants in the US without resorting to repentance has also sent a positive signal.
Experts also point to Modi’s warm personal rapport with Trump as an advantage. At Trump’s request, the Indian prime minister will make a visit to the White House this month, according to some reports.