The United States and India have embarked on an ambitious journey to more than double their bilateral trade, targeting a $500 billion mark by 2030. This announcement follows Indian Prime Minister Narendra Modi's assertion of a collaborative effort towards a mutually beneficial trade agreement. The two nations aim to strengthen their economic ties by addressing current trade dynamics and tariffs.
"Our teams will work on concluding very soon, a mutually beneficial trade agreement." – Indian Prime Minister Narendra Modi
In recent years, the U.S. has enjoyed Most Favored Nation (MFN) status with most major economies, excluding a few such as Russia. However, the trade relationship with India has been marked by a surplus of $45.7 billion in favor of India last year. To address this imbalance, the U.S. plans to mirror India's tariff rates. Currently, India imposes a 17% simple average tariff on MFN countries, while the U.S. levies only 3.3%.
"We are, right now, a reciprocal nation… We're going to have whatever India charges, we're charging them. Whatever another country charges, we're charging them. So it's called reciprocal, which I think is a very fair way," – U.S. President Donald Trump
In addition to tariffs, the U.S. will focus on mitigating the trade deficit through the sale of oil and gas to India. India's current import duties on agricultural goods stand at a substantial 39%, presenting another area of potential recalibration in their trade policies. This move aligns with the U.S.'s broader tariff strategy, which has seen tariffs imposed on China, Canada, and Mexico, alongside global tariffs on steel and aluminum imports.
While Trump's tariffs on Canada and Mexico are temporarily paused following commitments from both nations to combat illegal drug trafficking at their borders with the U.S., the overall intention remains to establish equitable trade practices. In 2024, the total goods trade between the U.S. and India is projected to reach $129 billion.
Beyond immediate trade concerns, the collaboration extends into technological and strategic domains. The U.S. and India plan to work jointly on advancements in artificial intelligence and semiconductors. Furthermore, they will focus on establishing robust supply chains for strategic minerals, ensuring both nations are well-positioned in these critical sectors.