President Donald Trump announced on Thursday that India has proposed eliminating tariffs on U.S. goods as part of a potential trade deal. This offer, if finalized, could mark a significant breakthrough with India, a key U.S. trading partner.
India’s High Tariffs and the Proposed Deal
Trump highlighted that India is one of the highest tariff nations globally, making it difficult for U.S. companies to sell goods there. “India is the highest — one of the highest tariff nations in the world. It’s very hard to sell into India, and they’ve offered us a deal where, basically, they’re willing to literally charge us no tariff,” Trump said during a roundtable with business leaders in Doha, Qatar.
The President pointed out that India’s tariff on U.S. goods is so high that it prevents significant trade between the two nations. He also referenced specific tariffs India imposes, such as 70% on automobiles, 20% on some networking equipment, and 80% on rice imports, along with non-tariff barriers like burdensome regulations on importers.
A Shift in Trade Dynamics
A zero tariff offer would be a welcome change for U.S. companies, as it would lower trade barriers and potentially increase exports to India, the world’s most populous country. While India’s Ministry of Commerce and Industry did not immediately respond to requests for comment, the announcement points to a shift in trade dynamics between the U.S. and India.
The Trade Deficit and Growing U.S.-India Relations
India has become the U.S.’s largest trade partner as of 2024, although it still ranks tenth among all U.S. trading partners. The trade deficit between the U.S. and India has been growing, with the U.S. importing $45.7 billion more from India than it exported there in 2024. This widening trade gap has prompted discussions about tariff reductions to improve the trade balance.
In light of President Trump’s broad tariff strategies, India is among several countries and trade blocs trying to negotiate deals with the U.S. India currently faces a 26% “reciprocal tariff” on its goods entering the U.S. after Trump imposed a baseline 10% levy on all imported goods in 2024. India has been negotiating with the U.S. to reduce these burdens on its exports.
Recent Developments in U.S. Trade Deals
Trump’s administration has already made strides in trade negotiations. Last week, the U.S. reached a preliminary agreement with the U.K. that reduced some tariffs and potentially opened the UK market to more American goods. Furthermore, the U.S. and China recently agreed to a 90-day pause on tariffs, marking a surprise breakthrough between the world’s two largest economies.
Trade Tensions with India
Trump has long criticized India’s tariff policies, particularly focusing on value-added and digital services taxes, as well as the growing goods trade deficit. In February, before meeting with India’s Prime Minister Narendra Modi, Trump stated, “They charge more tariffs than any other country.” He reiterated his dissatisfaction with India’s trade practices during his “Liberation Day” event in April 2024, saying, “India, very, very tough… You’re not treating us right.”
Despite these tensions, the White House has projected that removing these trade barriers could increase U.S. exports to India by at least $5.3 billion annually. The proposed zero-tariff deal could foster stronger economic ties and ease some of the challenges facing U.S. companies in India.
Future Prospects and Economic Impact
The goods trade deficit between the U.S. and India has nearly doubled since Trump’s first term. While this increase has been driven by mutual growth in imports from both nations, the elimination of tariffs could help balance the trade equation. The U.S. receives top exports from India, including pharmaceuticals, communications equipment, and apparel, while American exports to India include oils, gases, chemicals, and aerospace products.