Key points
- India appears set to face new tariffs once Trump assumes office
- Trump singled out India as the highest levier of tariffs during election campaign
- Trump calls India “a very big abuser” of tariffs
ISLAMABAD: India appears set to face new tariffs and the U.S. sanctions once President-elect Donald Trump assumes office on 20th January, in accordance with his commitments to impose measures on countries that impose high tariffs.
During his election campaign in October 2024, Trump singled out India as the highest levier of tariffs, pledging to retaliate upon returning to the White House. Later on, following his election victory, Trump reiterated his stance in December, calling India “a very big abuser” of tariffs. His firm position emphasises reciprocity in trade relations, a hallmark of his policy approach.
Trump’s stance on tariffs has been consistent in recent years. He previously criticised India as the “tariff king,” citing high import duties on products like Harley-Davidson motorcycles labelling them as “unfair” in early 2018. At that time, India imposed a 100 per cent tariff on imported motorcycles with engine capacities over 800cc.
In response to the criticisms, India reduced the tariff to 50 per cent in February 2018. However, Trump deemed this reduction insufficient and advocated for complete reciprocity, noting that the US imposed zero tariffs on Indian motorcycle imports. This time, he focuses on Indian tariffs on American vans and small trucks.
During his first presidency, India’s trade relations were marked both by progress and setbacks. While strategic ties improved, trade faced significant challenges. In 2019, India retaliated against U.S. steel and aluminium tariffs by imposing its duties on American products.
“He previously criticised India as the “tariff king,” citing high import duties on products like Harley-Davidson motorcycles labelling them as “unfair” in early 2018.”
Resultantly, Trump responded by withdrawing India’s preferential trade status under the Generalized System of Preferences (GSP), which adversely affected Indian exports not only to the U.S. but also to Europe. Trump has repeatedly stated that India imposes the highest tariffs on foreign products, albeit with a friendly demeanour.
In a key pre-election economic policy speech, Trump highlighted reciprocity as a central component of his plan to “make America extraordinarily wealthy again,” emphasising that unlike the other nations, including India, the U.S. rarely imposes tariffs.
According to the American international trade agency—the U.S. International Trade Commission—the Indian government has consistently raised tariff and non-tariff barriers to protect domestic suppliers across most sectors and to bolster indigenous production. For example, in its 2021-2022 annual budget, the Indian government increased tariffs for 31 product categories, including cotton and denatured ethanol for select end-use, and raised duties on solar equipment.
In its 2022-2023 budget, India further raised tariff rates on imported headphones, loudspeakers, and smart meters used by power distribution companies. Meanwhile, in the 2023-24 annual budget, India raised tariffs for private jets, helicopters, plastic goods, jewelry, high gloss paper, and vitamins.
In addition to Trump’s tariff plans, the outgoing Biden administration has already imposed sanctions on India for its dealings with Russia and investments in Iran’s Chabahar Port. On October 30, 2024, the U.S. Department of the Treasury sanctioned 19 Indian companies and two individuals under Executive Order 14024, which targets entities that have supported the Russian government in war against Ukraine.
“On October 30, 2024, the U.S. Department of the Treasury sanctioned 19 Indian companies and two individuals under Executive Order 14024, which targets entities that have supported the Russian government in war against Ukraine.”
Treasury’s actions in terms of sanctions include freezing the assets of the sanctioned entities and banning the U.S. citizens from engaging in transactions with them. According to the U.S. trade officials, the sanctions dealt a big blow to the Indian companies and individuals in terms of complete shutdown in America, incurring billions of dollars business as well as opportunity loss.
This led the Indian Members of Parliament (MPs) to raise concerns about the potential fallout from these sanctions and questioned the Indian government’s response. The Ministry of External Affairs responded, confirming the sanctions and stating that they were imposed under the U.S. regulations.
Indian media has criticised the Modi government for failing to address the U.S. Treasury sanctions on Indian entities linked to Russia and Iran, asserting that India does not recognise unilateral sanctions. The U.S. trade officials anticipate that the upcoming Trump administration will put India under pressure regarding both tariffs and sanctions related to third-party countries. Despite Trump’s efforts to involve Indian-Americans in his team, experts believe his plans to impose tariffs may strain India’s relations with the U.S. moving forward.
