US-India Trade Deal: PM Modi’s Friendship With Donald Trump To Make India A Sweet Spot Amid Tariffs?

US President Donald Trump, on Friday, hinted at a likely India-US trade deal in the working. Showering praise upon ‘good friend’ PM Narendra Modi, Trump said that the deal is ‘going to work out very well between India and US’.

“Prime Minister Modi was here just recently, and we've always been very good friends. India is one of the highest tariffing nations in the world... They're very smart. He (PM Modi) is a very smart man and a great friend of mine. We had very good talks. I think it's going to work out very well between India and our country. And I want to say you have a great prime minister..." Trump said.

India US Trade Deal: What We Know So Far

As reported earlier, New Delhi and Washington have been busy chalking out a trade agreement to work out a midway path between the two countries in light of Donald Trump’s tariff plans.

According to a PwC report, many proposals indicated by the US have shaken up the markets and initiated discussions within supply chains.

The report categorized US tariffs into three key types namely, country-specific, sector-specific and markets specific or reciprocal tariffs.

Country-Specific Tariffs

As of now, country specific tariffs have been notified for China, Canada and Mexico and effectuated for imports from China, the report said. These tariffs have been imposed on the basis of strategic and other geopolitical considerations.

But there are some risks such as India's trade deficit with the US, wherein, if the US administration focuses on reducing trade imbalances, India’s exports could face selective tariffs.

Another risk are the trade relations between India and the US. While  both countries
have strengthened ties, possible disputes over digital
taxes, data localization, etc. could lead to
tariff actions, according to the report.

Further, there are tariffs that are imposed on developing nations. The U.S. is reconsidering its tariff policies for emerging economies. "Thus, while India has already graduated from U.S. trade preference programs such as the Generalized System of Preferences (GSP), further structural changes in the program may hamper India's attempts to restore GSP benefits for certain sectors," it added.

Sector-Specific Tariffs

After Trump got elected as President, the United States administration has imposed or proposed higher tariffs in key sectors affecting India.

Auto And Pharma Tariffs: Similar to duties on semiconductors and pharmaceutical imports, the US President also announced 25% tariffs on auto imports, the expected implementation of which will start from April 2, 2025.

In 2018 and 2019, the Commerce Department had conducted a national security investigation into auto imports and found that they weakened the domestic industrial base. At that time as well, threat of 25% tariffs was notified, however no action was taken.

Steel And Aluminum Tariffs: A new 25% tariff on almost all steel and aluminum imports into the U.S. has been imposed. This directly impacts Indian steel manufacturers exporting to the U.S. These tariffs  have taken effect as of March 12, 2025.

Markets-Specific Or Reciprocal Tariffs

The Trump administration is considering reciprocal tariffs to counteract against tariffs and non-tariff barriers imposed by other countries. The specific details have not been notified in the public domain yet.

Recently, market expert Ajay Bagga also commented on whether or not India will get a tariff break from Trump.

However, the U.S. government may assess reciprocal tariffs based on the following five factors:

• Current Tariff Levels on US Goods: If a country imposes high tariffs on U.S. exports, the U.S. may reciprocate by levying equal amount of tariff on imports from that country into the U.S.
• Internal Taxes: Additional tax burdens on U.S. businesses, like domestic Value Added Tax (VAT), etc. may also trigger retaliatory tariffs and/or be a part of their calculation.
• Non-Tariff Barriers & Regulatory Burdens: Complex compliance requirements impacting the U.S. businesses.
• Foreign Exchange Policies: Countries manipulating exchange rates to disadvantage the U.S.
• Structural Impediments: Any other trade practices deemed unfair by the USTR.

Also Read: Impact Of US Tariffs On India: Mobile Exports May Be Hit, Auto Component Prices May Go Up - PwC Report