DONALD TRUMP, the 47th U.S. President, has in the past described India as a “tariff king”. And in the first few weeks of his second stint, the U.S. has unilaterally initiated action against India, and other trade-surplus nations, by imposing tariffs on products like steel, aluminium, and pharma. What many aren’t aware is that India was one of the 23 founding members of GATT, the predecessor of the WTO. The country’s commitment to the market economy and strong democracy makes it a natural ally of the U.S. But the perception, especially in the U.S., is that India imposes high tariffs and isn’t market-friendly.

The U.S. believes trade surplus countries like India, Canada and Mexico use unfair trade practices. High trade deficits with India and the world are a cause of concern among U.S. officials who believe unbalanced free trade is hurting millions of Americans who are losing jobs.

From a starting trade deficit of less than $80 billion in 1991, U.S. trade deficit reached $918.4 billion in 2024. The largest trade gaps were recorded with China ($295.4 billion), the EU ($235.6 billion), Mexico ($171.8 billion) and Vietnam ($123.5 billion). In FY24, merchandise trade deficit between India and the U.S. stood at $35.3 billion. The largest drivers of this deficit were pharma products, jewellery and silverware, auto parts, travel goods and steel pipes.

India has been reducing tariffs on products that are mainly imported from the U.S. In Union Budget 2025, India reduced tariffs on motorcycles (from 50% to 30%), special waste and scrap items (5% to 0%), fish hydrolysate (15% to 5%), and synthetic flavourings essences (100% to 20%). But according to the U.S., the average Most Favoured Nation (MFN) tariff rate of India at 17.6%, is the highest among any major world economy.

Most Favoured Nation tariff

India and the US: Navigating the complex battle for tariff dominance