US vs India: Trade Tariffs and Their Impact on Key Sectors

Trade tensions between the United States and India have revolved around tariffs in industries such as IT, automobiles, manufacturing, alcohol, and FMCG. The import-export ratio between the two countries has played a crucial role in shaping these policies, with India’s exports to the US standing at $80.9 billion in 2023, while US exports to India were at $46.2 billion, reflecting a trade surplus in India's favor.

IT and Technology Sector

India’s IT services exports to the US exceed $100 billion annually, making it a crucial sector. However, US restrictions on H-1B visas and digital services taxation have impacted Indian companies. Meanwhile, India levies import duties of up to 20% on US tech goods like laptops and semiconductors, making high-end devices costly. With India pushing for self-reliance in tech manufacturing, trade negotiations may determine future tariff relaxations.

Automobile Industry

India imports high-end cars from the US, but steep import duties (up to 100%) have limited market penetration. The US, in contrast, imposes only 2.5% tariffs on Indian auto exports, which include two-wheelers and components. India exported auto components worth $2.3 billion to the US in 2023, while importing vehicles worth $500 million. American carmakers like Tesla are lobbying for lower duties, which could impact the pricing of EVs in India.

Manufacturing and Industrial Goods

The US imposed 25% tariffs on Indian steel and 10% on aluminum imports in 2018, affecting India’s $7.5 billion annual metal exports. In return, India levies tariffs on American industrial equipment and machinery, limiting US manufacturing exports to India. Talks are ongoing to lower these barriers for mutual benefit.

Alcohol and FMCG Tariffs

India imposes a 150% tax on imported liquor, making US whiskey and wine highly expensive. In 2023, India imported $50 million worth of US alcoholic beverages, while US food product exports to India totaled $1.8 billion. The US is pushing for lower duties to expand its market share in India's growing premium beverage sector.

Way Forward

With trade imbalances in focus, US President Donald Trump recently stated, "I believe they're going to probably be lowering those tariffs substantially." If negotiations succeed, industries across both nations could see enhanced trade flows, benefiting businesses and consumers alike.