US President Donald Trump laid out his administration’s America First policies as he addressed a joint session of the US Congress on March 4, 2025. “Plants are opening up all over the place. Deals are being made like never seen. That’s a combination of the election win and tariffs. It’s a beautiful word, isn’t it? That that along with our other policies will allow our auto industry to absolutely boom.” Trade policy, tariffs and investment plans prevailed throughout Trump’s address, one of the longest to a joint session of Congress lasting one hour and 39 minutes.
“It's very unfair” is what Donald Trump called India’s tariffs on American goods; announcing reciprocal tariffs on imports. Warning that “nobody can argue with me, Trump has indicated that tariff policies are unlikely to change and are effective April 2, because he is indeed no one’s fool.
High tariffs imposed by India on American goods, such as automobiles, agricultural products, and electronics, has been a long-standing point of contention. The US has criticised these duties as barriers to free trade, while India defends them as necessary for protecting domestic industries and generating revenue.
Import duties contribute significantly to the Indian government's revenue, and serve to protect domestic manufacturers, to shield them from global manufacturers. However over a long term such ‘barriers to free trade’ limits consumer choice forcing buyers to opt for locally manufactured or assembled vehicles, even if they prefer international brands. Last year America’s total goods trade with India was at $129.2 billion, with exports at $41.8 billion and $87.4 billion worth imports, resulting in a trade deficit of $45.7 billion, which the US views as a challenge to its economic interests.
In 1991, under the leadership of Manmohan Singh, then-Finance Minister of India took a monumental step by opening its economy to the global market. Fast forward to today, over three decades later, despite the initial vision of a liberalised market, import duties on certain goods remain staggeringly high—some that ‘exceed 100 per cent’ of the product's value. This has led to Indian consumers bearing the brunt of these taxes, paying a significant premium for imported products, including those from the United States. While these taxes are often justified as a means to protect domestic industries and generate government revenue, they also limit consumer choice and inflate prices. In an increasingly globalised world, where access to international goods is seen as a marker of economic progress, high import duties seem to contradict the spirit of the 1991 reforms.
If Trump 2.0 does indeed implement retaliatory tariffs, India's key exports to the US, such as steel and aluminium, pharmaceuticals, textiles, electronics, and engineering goods, could be affected. Steel and aluminium could face a 25 per cent tariff, while increased costs would threaten the competitiveness of generic drugs, textiles, and apparel. Similarly, electronics like smartphones and semiconductors, as well as engineering goods including machinery and auto parts, could see reduced demand and hindered market access, impacting revenue and investments.
New Delhi and Washington are currently negotiating a bilateral trade deal, and the Trump administration’s trade policies give India a reference point to evaluate what kind of market access it wants, and if it is able to receive favourable concessions under the FTA. India holds a strong negotiating position in the generic medicines market. The US relies on India for 50 per cent of its generic drug imports, valued at $13 billion, contributing to a broader economic impact of $408 billion. Imposing high tariffs would considerably raise drug costs, placing a heavy burden on American citizens.
India plays a growing role in the global electronics supply chain. American companies that rely on Indian electronics for manufacturing or assembly could face higher input costs.
Tariff reductions with guarantees that companies will manufacture in India, does not align with Trump’s Make in America policies, and US officials could push for more duty reductions.
If India reduces its tariffs, several American goods could become more affordable for the Indian consumer, making brands like Tesla, Ford, and Jeep more accessible. Products such as Apple devices, gaming consoles, and high-end laptops could see price drop. As could almonds, apples, and other US produce, which currently face high duties. Indian consumers seeking premium high-end American fashion, accessories, and cosmetics could see reduced prices.
Harley-Davidson ceased its independent operations in India in 2020 due to challenges like high import duties and limited sales. While the Harley-Davidson X440, developed through a strategic collaboration with Hero MotoCorp, carries the Harley badge, it doesn't fully replicate the "classic Harley" known for its larger engine, iconic cruiser design, and premium features. Currently cars like the Jeep Wrangler and Grand Cherokee are priced much higher in India as they face high tariffs. If taxation changes as a result of Trump’s policies, it could potentially make American cars more affordable for Indian buyers.
The challenge for the Indian government lies in being able to strike a balance—one that protects domestic industries while also ensuring that Indian consumers are not unduly burdened. Trump’s America First policies that forces India to re-examine tariffs could foster a more competitive market, and make high-quality international products more accessible to the average Indian consumer. Indeed ‘tariff - It’s a beautiful word, isn’t it?’
_**Vaishali Basu Sharma is a security and economic affairs analyst.**_
_**The opinions expressed in this article are those of the author and do not purport to reflect the opinions or views of THE WEEK.**_