The U.S.-India Bilateral Trade and China’s Go in between—Indian P.M. Modi Meeting U.S. President Trump

U.S. President Donald Trump clubbed India along with China and termed it “a very big abuser of tariff”. The U.S.-India bilateral trade is in favour of India and this is why Trump wants India to buy more from the U.S. so that U.S.-India trade is fair and mutually benefitting.

China-India bilateral trade is in favour of China—and India is a big market for Chinese goods.

In fact, India is a big market for foreign goods and China is making the best use of this situation at present.

Trump has asked India to buy more from the U.S. and India’s latest position is that it has agreed to review its trade with the United States.

China has been an antagonistic nation for India and there have been border and other disputes between the two nations in the past. The two nations have already fought a bloodied war in 1960s.

Are the U.S. and India looking at the latest development as a win-win situation for both—given the trade-war that Trump has declared upon China, and India already going through a rough weather with China?

Indian Prime Minister Narendra Modi, who had a telephonic conversation with the U.S. President Trump earlier on January 27, is scheduled for a visit to the U.S. from February 12 to February 13, 2025. He is scheduled a hold a meeting with Trump, and in all likelihood the two nations will explore possibility of a free trade agreement.

Bilateral trade between the U.S. and India

In 2024, the size of the bilateral trade between the two nations stood at $118.2 billion, in which India had a trade surplus of around $36 billion.

Goods exported from India to the U.S. include engineering goods, electronic goods, gems and jewellery, petroleum products, drugs, cotton among other things.

List of good the U.S. goods exported to India in 2024 included mineral fuels, oils, pearls, nuclear reactors boilers and machinery and electrical machinery.

Why Trump terms India a “big abuser of tariff”?

India have been imposing huge tariff on some luxury goods imported from the U.S.—and the tariff is upto 150%. These goods include alcoholic beverages, luxury cars and others. India is learnt to be reviewing the tariff of such goods, planning to slash it by half ahead of the Indian Prime Minister’s meeting to U.S. President Trump. On the other hand, India has an average tariff of around 9.5% on all other goods from the United States.

China-India trade

Chinese export size to India stood at $118.4 billion, in which India stood at a trade deficit of around $57.83 billion.

China is India’s top trading partner at present.

Chinese goods that are exported to India include telecommunications equipment, pharmaceuticals, smartphones, laptops, PC, advanced technology, lithium-ion batteries for electric vehicles, and many other things.

Chinese goods are cheap—which is a reason why Indian markets are flooded with them.

In recent days, India has adopted a policy to replace its markets with locally produced goods trying to peg them at competitive prices vis-à-vis Chinese goods. But success in it will depend on quality local products.

India’s exports to China include iron ore, petroleum products, fish and seafood, organic chemicals, vegetable oils, granite, and pharmaceuticals.

The Luxury Alcohol Brands from the U.S. to India

One of the sectors in which India imposed huge tariff on imports from U.S. is luxury liquor brands—to the tune of 150%, which is being slashed by half before Prime Minister Modi’s meet with U.S. President Trump.

India is a huge market for imported liquor and luxury alcohol from the United States include whiskey, scotch, rum, gin, vodka and tequila. India is one of the largest liquor markets with whisky being the most preferred of drinks.

India’s liquor imports from China are insignificant while it imports liquor from countries other than the U.S. like Britain, France, Ireland etc.

U.S. exports luxury alcohol to India worth around $ $20.5 million a year—out of a total of about $ 1 billion imports by India in all.

As of now, India does not have a Free Trade Agreement with the United States.

Trump’s tariff call upon India might make India think over the possibility of putting in place a Free Trade Agreement with the United States and also agree to buy more from the United States. Modi’s meet with Trump is expected to take the matter to a conclusive end.

At the telephonic conversation of January 27, Trump is said to have stressed that India needed to buy more American-made security equipment as well as a review by India for a fair trade.

American Car Brands Vs Chinese Car brands in India

American car brands which have good market in India include Ford, Chevrolet and GMC, where as Chinese car brands operating in India include MG Motors and GWM.

Who India is closer to: China or the U.S.?

India traditionally positions itself closer to neither of the camps. Its foreign policy goes by its national interest. Now that U.S. President Trump has threatened to impose 100% tariff on BRICS countries if they try to replace U.S. Dollar with a new currency for international transactions, India has clarified that is the U.S. Dollar is good enough for it. Besides, Trump’s tariff threat to India because of India’s being an ‘abuser of tariff’on U.S. goods, too has left India with limited choice.

However, India has been a strategic partner of the United States in its efforts to counter China in the region, and due to this India may review to enhance its trade relations with the U.S. to create a win-win for both.

Biden-Modi meeting of 2022

In the past, former U.S. President Joe Biden and Indian Prime Minister Modi have already held talks on bilateral trade and relations. In May 2022, the two leaders met in Tokyo, Japan on the sidelines of Quad Summit.

In September 2023, Biden visited India, and the two nations reiterated their resolve to cooperate in areas like defence, trade, investment, education, health, research among other things.

To sum up, India being a huge importer of Chinese goods, and the U.S. resolved to maintain its economic supremacy, India is forced to offer a fair-trade-play to the United States against China to maintain its present exports to the United States.