India Needs a Strategy to Counter US Tariffs

India will have to act fast to introduce drastic reforms in its taxation structure, remove restrictive laws and regulations on manufacturing and facilitate massive automation in core sectors

- ARVIND KUMAR & SHESHADRI CHARI

The tariff imposed by the United States in India has raised a number of debates relating to the varying challenges and how India will cope up as far as the trade relations with the United States is concerned. India's volume of trade with the United States is USD 191 billion. The target set so far was that the volume of trade might reach the $500 billion figure by 2030 if the ease of doing business from both sides remain conducive.

Unfortunately, the way the recent announcements by President Trump got unfolded have raised serious questions on the continuity of India-US trade relations. The day President Trump used the International Economic Powers Act (IEPA) of 1977 in April this year marked the beginning of a new era in US engagement with the world in general and India in particular.

Speaking from the Oval Office, Trump has said, "We get along with India very well, but for many years, it was a one-sided relationship". He meant that the export-import ratio was in India's favour. Trump's reference was also to the high Indian tariff on exports to America. But it is interesting to note that he preceded his rant about high tariff by saying "We get along with India very well". This should be taken as an olive branch towards India, especially coming soon after the photographs of Narendra Modi, Xi Jinping and Vladimir Putin huddled together at the SCO meeting in Tianjin went viral.

It will not be far from truth to say that the high tariff on Indian exports to the US, mostly services in the IT sector, as compared to low US tariff on exports to India has tilted the balance of trade in India's favour. From $652.8 million in 1985, US trade deficit with India has grown to $34,253.8 million in 2025.