Trump put pressure on Modi to increase tariff rates on India.
On April 3, 2025, President Donald Trump announced a 26% tariff on India, calling it a "discounted" reciprocal tariff to match the high tariffs India imposes on US goods. Despite calling Indian Prime Minister Narendra Modi a "great friend", Trump criticized India for treating the United States unfairly in trade relations. The announcement was made during a "Make America Prosper Again" event at the White House Rose Garden, where Trump highlighted the disparity in tariffs between the two countries, saying that India imposes a 52% tariff on US goods, while the US takes almost nothing in return.
Trump emphasized the need for a level playing field in trade and highlighted the US's substantial trade deficit with India, estimated at around $100 billion. He said the US had been taking almost nothing from India for years, and only recently has it started imposing tariffs on China. Trump also mentioned the matter of India's 100% tariff on imported cars, which has long been a bone of contention in US-India trade relations. During a joint press conference with Modi in February, Trump had earlier called India a "tariff king" and a "big abuser" in global trade, while also acknowledging Modi as a "very smart guy" and a "great friend".
Soon after Trump's second term inauguration, Modi visited Washington, D.C. in February to discuss trade imbalances and strengthen strategic partnerships. The visit was aimed at avoiding a potential trade war and negotiating fair trade relations. During the visit, the two leaders agreed to begin dialogue to correct long-standing inequalities and work towards a level playing field. They also set a new bilateral trade goal of "Mission 500", which aims to more than double the total two-way goods and services trade to $500 billion by 2030.
Despite the cordial relations between Trump and Modi, Trump warned that India will not be spared from high tariffs. He said that whatever tariff India imposes, the US will also impose the same, stressing the need for reciprocity in trade. Trump also mentioned that the US will impose "rebated reciprocal tariffs" on India, which is 52% of the tariff imposed by India on US goods. The tariff announcement was part of a broader strategy to address trade imbalances with various countries, including China, the European Union and the United Kingdom.
In response to Trump's announcement, India is considering tariff cuts in at least a dozen sectors, including electronics, medical and surgical equipment and chemicals, to boost US exports and avoid a trade war. India is also reviewing surcharges on over 30 items, including luxury cars and solar cells, to address US concerns. The tariff announcement has raised concerns in Indian industries, especially the engineering goods sector, which contributes about $25 billion of steel and aluminium exports. Industry executives expressed hope that the issue could be resolved amicably during Modi's visit to the US.
The tariff announcement has also raised questions about the future of trade relations between the US and India. Though the two leaders agreed to finalise a preliminary trade deal and begin negotiations to resolve their impasse over tariffs, the high tariffs imposed by India remain a major issue of contention. Trump's announcement of 26% tariffs on India reflects his administration's commitment to address the trade imbalance and ensure reciprocity in trade relations. Despite the warm personal relationship between Trump and Modi, the tariff announcement underlines the challenges in achieving a fair and balanced trade relationship between the two countries. Trump's tariff announcement has also raised concerns about the impact it could have on the Indian economy. While some analysts argue that the Indian economy may remain relatively untouched by the impact of tariffs, others warn of potential negative consequences for Indian industries and exports. The tariff announcement has also raised questions about the future of US-India trade relations and the possibility of a trade war. Despite the challenges, both leaders have expressed commitment to resolving trade disputes and strengthening the strategic partnership between the two countries. The announcement of tariffs marks a significant development in the US-India trade relationship and highlights the ongoing challenges in achieving a fair and balanced trade relationship.