India and the United States share a complex and evolving trade relationship shaped by a blend of cooperation, strategic interests, and economic friction. Over the years, trade between the two nations has grown significantly, but tariff-related disputes have repeatedly threatened to derail progress. Tariffs on key sectors, including steel, aluminum, agricultural products, and automobiles, have been at the center of these disagreements. This blog explores the historical context of India-U.S. trade tensions, recent developments in tariff negotiations, and the broader economic implications for both nations.

Historical Context of India-U.S. Trade Relations

India and the United States have maintained diplomatic and trade ties since India gained independence in 1947. However, the modern phase of trade cooperation began in earnest following India's economic liberalization in 1991, which opened up the Indian market to foreign investments and trade. The U.S. quickly became one of India's largest trading partners.

Early Trade Disputes

• While trade volumes increased, disputes over tariffs and market access emerged early on:
  • 1990s – The U.S. raised concerns over India's restrictions on agricultural imports and its complex licensing system.
  • 2007 – The U.S. filed a case at the World Trade Organization (WTO) against India over import restrictions on poultry products.
  • 2014 – India imposed duties on U.S. solar imports in response to American policies supporting domestic renewable energy.
     
• The Steel and Aluminum Tariff Dispute (2018)
  • A major escalation occurred in 2018 when the U.S. under President Donald Trump imposed tariffs of:
    • 25% on steel
    • 10% on aluminum
  • These tariffs were justified under Section 232 of the Trade Expansion Act, citing national security concerns.
  • India retaliated by imposing customs duties on 28 U.S. products, including key agricultural exports like:
    • Almonds
    • Walnuts
    • Apples
    • Chickpeas
       
• Removal from the Generalized System of Preferences (GSP)
  • In June 2019, the U.S. removed India from the GSP program, which had allowed duty-free access to around $6 billion worth of Indian exports annually.
  • The decision was based on the U.S.'s claim that India failed to provide "equitable and reasonable access" to its market.
     
• Recent Developments in Trade Negotiations
  • Resolution of WTO Disputes (June 2023)
    • In June 2023, India and the U.S. agreed to terminate six outstanding disputes at the WTO, including:
      • Tariffs on steel and aluminum
      • Agricultural trade barriers
      • Intellectual property concerns
    • India agreed to remove retaliatory tariffs on several U.S. products in exchange for the restoration of favorable market access terms.
    • The agreement allowed American agricultural products such as apples, walnuts, and lentils to regain competitive pricing in the Indian market.
       
  • Agricultural Trade Agreement (September 2023)
    • In September 2023, India and the U.S. resolved their last pending WTO dispute concerning the importation of certain agricultural products.
    • India reduced tariffs on:
      • Frozen turkey and duck
      • Blueberries and cranberries
      • Processed fruits and nuts
    • This agreement helped U.S. farmers regain a foothold in the Indian market, while India benefited from increased trade stability.
       
• Ongoing Tariff Challenges
  • Automobile Sector Tariffs
    • India imposes tariffs of 60%–110% on imported cars, one of the highest in the world.
    • The U.S. has been pressuring India to lower these tariffs, especially to facilitate the entry of companies like Tesla into the Indian market.
    • The U.S. has suggested a "zero-tariff" deal on electric vehicles (EVs) to encourage investment and market expansion.
    • Tesla CEO Elon Musk met with Indian officials in 2024 to explore the potential for setting up a manufacturing plant in India.
    • However, the Indian government remains cautious, aiming to protect domestic manufacturers such as Tata Motors and Mahindra.
  • Medical Devices and Pharmaceutical Tariffs
    • The U.S. has raised concerns over India's price controls on medical devices, such as coronary stents and knee implants, which affect American exports.
    • India has defended these measures, citing the need to make healthcare more affordable for its population.
  • E-Commerce and Digital Trade
    • India's Foreign Direct Investment (FDI) regulations on e-commerce have restricted the operations of American companies like Amazon and Walmart-owned Flipkart.
    • India mandates that e-commerce platforms cannot influence pricing or hold inventory directly, which limits their competitive advantage.

Economic Implications of Trade Negotiations
Trade Volume and Growth

• Bilateral trade between India and the U.S. has shown consistent growth despite tariff challenges:
• 2021–22: $119.5 billion
• 2022–23: $128.8 billion (↑7.7%)
• India's key exports to the U.S. include:
• Pharmaceuticals
• Textiles and apparel
• Engineering goods
• Software services
• U.S. key exports to India include:
• Crude oil and LNG
• Defense equipment
• Agricultural products
• Electronics
• Crude Oil and Energy Trade
• In February 2025, U.S. crude oil exports to India reached a two-year high of 357,000 barrels per day.
• This surge was driven by Western sanctions on Russian oil and increased demand for U.S.-sourced light sweet crude.
• India has diversified its oil supply sources to balance geopolitical risks.
• Foreign Direct Investment (FDI)
• The U.S. remains one of the largest sources of FDI in India, with investments in technology, pharmaceuticals, and manufacturing.
• Indian companies like TCS and Infosys have also increased their presence in the U.S., contributing to job creation and technological cooperation.
• Geopolitical and Strategic Dimensions
• Strategic Alignment through Trade
• India and the U.S. have aligned on broader geopolitical issues, including balancing China's growing influence in the Indo-Pacific region.
• The QUAD alliance (India, U.S., Japan, Australia) reflects a shared strategic interest in maintaining regional stability.
• Trade agreements are seen as an extension of this strategic partnership.
• Defense and Technology Cooperation
• Defense trade between the U.S. and India has grown from $1 billion in 2008 to over $20 billion in 2023.
• The India-U.S. Initiative on Critical and Emerging Technologies (iCET) was established to deepen cooperation in semiconductors, artificial intelligence, and defense technology.
• Challenges and the Path Forward
• India's high tariff regime remains a concern for U.S. negotiators.
• The U.S. seeks greater market access for agriculture, automobiles, and medical devices.
• India remains protective of its domestic industries and seeks balanced trade terms.
• Intellectual property rights (IPR) and digital trade regulations require further alignment.
• Potential Solutions
• Bilateral Free Trade Agreement (FTA) – A comprehensive FTA could address many tariff and non-tariff barriers.
• Sector-Specific Agreements – Targeted agreements on automobiles, agriculture, and pharmaceuticals could ease tensions.
• Technology and Defense Cooperation – Expanding partnerships in defense and critical technology sectors could create mutual benefits.

Conclusion
India and the U.S. are navigating a critical phase in their trade relationship. While substantial progress has been made in resolving past disputes, ongoing tariff challenges highlight the need for continued dialogue and strategic compromise. A balanced approach that protects domestic industries while fostering mutual trade growth will be key to strengthening this vital economic partnership.

Also Read:

• Legal Dimensions of India-USA International Trade Relations