The U.S.-India Trade Relationship

U.S. President Donald Trump’s past week of trade tariff announcements has shaken up the world economy, sending stock markets plummeting and global brokerages raising the odds of a global recession to 60 percent. India has been hit with U.S. tariffs of 26 percent, with the pharmaceuticals sector currently exempt. This won’t be for long though, as Trump announced on Tuesday that “major” duties on the sector will be revealed shortly, as he hopes to move operations to U.S. soil. Following the warning, global drugmakers’ stock prices plummeted, with Indian pharmaceutical stocks (.NIPHARM) closing nearly 2 percent lower, according to Reuters.

Observers have taken various stances on what this all means for the South Asia nation. On the one hand, it could cause significant damage to sectors such as India’s diamond and jewelry industry, which is one of the country’s biggest export commodities to the U.S. A more optimistic view from other analysts, however, highlights how India could see textiles, electronics and machinery opportunities arise as manufacturing may relocate there from other nations. While India’s additional tariffs are high, they are currently lower than those of regional neighbors such as China (54 percent), Vietnam (46 percent), Thailand (36 percent) and Bangladesh (37 percent). 

According to UN Comtrade data published by the OEC, the U.S. imported $85.5 billion worth of Indian commodities in 2023, while India imported $41.4 billion worth of goods from the United States. Precious stones including diamonds and jewellery, as well as electronics and pharmaceutical products were the most valuable categories of Indian exports to the U.S. that year, together accounting for around 40 percent of total exports from India to the U.S. The three most valuable exports from the U.S. to India in 2023 were mineral fuels and oils ($13.6 billion), machinery and mechanical appliances ($5.32 billion) and precious stones, metals and pearls ($2.41 billion).

India has so far not announced reciprocal tariffs on the U.S.