Trade and tariff wars: India caught between US and China, a rock and a hard place

While the United States is India's largest trading partner, accounting for over USD 190 billion of annual trade, without affordable inputs from China, the Indian automobile, telecom and pharmaceutical industries will not be competitive.

And how long will China, insulted and under attack by the US, allow India to benefit from the pain inflicted on the Chinese and keep exporting to the US?

Moreover, negotiating with an unstable and unreliable Trump administration is unlikely to be easy.

With Canada, the European Union and Japan indicating a willingness to retaliate in kind — though each of them has kept doors open for negotiations with the US — Trump will be tempted to turn to softer and more vulnerable targets.

Between 2001 and 2023, India's exports to the US rose by 10.48 per cent at a compounded annual growth rate (CAGR). In this period, the US imports from the rest of the world grew by just 4.76 per cent. The two economies have strongly integrated through various agreements, including the IPEF (Indo-Pacific Economic Framework for Prosperity) and other bilateral mechanisms.

India's exports to the US stood at USD 77.51 billion in 2023–24, while imports aggregated at USD 42.2 billion.

India’s top exports to the US these past few years have been pharmaceuticals (USD 10.4 billion), diamonds (USD 7.61 billion) and broadcasting / telecom equipment (USD 6.18 billion). India imported crude petroleum (USD 5.5 billion), coal briquettes (USD 4.61 billion) and gas turbines (USD 2.39 billion).

Defence purchases do not fall under ‘trade’, though.

The US, of course, enjoys a huge surplus when it comes to services —including software, software services and digital services like streaming, music, films and apps — and the Trump tariffs have left them untouched until now.

However the US president has also threatened to levy .

Meanwhile, the goods trade between India and the US has been growing at a fast clip.

In January 2025, India exported USD 8.44 billion worth of goods to the US and imported USD 3.58 billion worth of goods from the United States. Between January 2024 and January 2025, exports from India to the US increased by USD 2.37 billion (39 per cent) — from USD 6.07 billion to USD 8.44 billion. Imports increased by USD 1.23 billion (52.3 per cent) — from USD 2.35 billion to USD 3.58 billion. This is partly attributable to for export to the US.

Once again, in January 2025, India’s exports to the US were driven mainly by telecom instruments, gold and pharmaceuticals, while India’s imports from the US were mainly petroleum crude, gold and electronics components.

India is a minor trade partner of the US compared to Canada, Mexico, China and the EU. But it is the size of the Indian market that is alluring to US policymakers.

As other countries retaliate and put up trade barriers to US goods and services, India also assumes much greater importance to the US than the current trading figures would suggest.

Swaminathan Aiyar in his column in the Times of India on 6 April 2025. India can cope with high tariffs, he suggested, but will be hurt by any global recession that might follow a trade war.

The other challenge before India is to withstand the US pressure to open up its market for agricultural produce and dairy products. If the US finds it difficult to sell its corn, soyabean, meat and milk products elsewhere, India presents a large market that the US has eyed for decades.

President Trump was being unfair while describing India as the ‘tariff king’. India has followed scrupulously the rules. It is the US which has walked away from them.

While Indian diplomats and negotiators have been polite to a fault, they would, hopefully, have pointed out to the Americans that the United States itself has very high import duties to protect its dairy products (188 per cent), fruits and vegetables (132 per cent), coffee, tea, cocoa and spices (53 per cent), cereals and food preparations (193 per cent), oilseeds, fats and oils (164 per cent), beverages and tobacco (150 per cent), fish and fish products (35 per cent), minerals and metals (187 per cent) and chemicals (56 per cent).

It is therefore a little rich for the US to complain of high tariffs imposed by others.