India has taken a significant step in liberalising its trade policies by reducing import duties on motorcycles, cutting tariffs on heavyweight bikes (above 1600cc) from 50% to 30% and on smaller bikes from 50% to 40%.
This move, primarily aimed at easing the entry of Harley-Davidson into the Indian market, is being viewed as a strategic attempt to avert the looming threat of tariffs from the United States.
The United States, under President Donald Trump, has consistently scrutinised India’s tariff policies. With Trump’s return to the White House, trade discussions have intensified, raising concerns over whether these tariff reductions will be sufficient to satisfy his administration or if additional trade-related measures against India are under consideration. The US exported $3 billion worth of motorcycles to India last year, and further trade negotiations will likely determine the future trajectory of this relationship.
Donald Trump has repeatedly criticised India’s high tariffs, particularly highlighting the 100% duty once imposed on Harley-Davidson motorcycles. He has labelled India as the “tariff king” and accused it of being among the worst abusers of trade relations. This rhetoric has influenced India’s approach, leading to adjustments in its tariff structure.
Ajay Srivastava, founder of the Global Trade Research Institute, notes that if the US can take trade actions against its closest allies, Canada and Mexico, India is not exempt from potential economic pressure. Trump’s recent phone call with Prime Minister Narendra Modi emphasised the importance of balancing trade and increasing India’s defence purchases from the US—a move interpreted by many as an effort to leverage India’s strategic interests to boost American exports.
India enjoys a trade surplus with the US, its largest trading partner. Bilateral trade was projected to surpass $190 billion by 2023, with India’s goods exports to the US growing by 40% since 2018 to reach $123 billion, and services trade expanding by 22% to $66 billion.
Meanwhile, US exports to India stood at $70 billion, with key categories including crude oil, petroleum products, LNG, coal, medical equipment, and scrap metal.
Apart from motorcycles, India has removed import duties on satellite ground installations, benefiting US exporters who supplied $92 million worth of equipment to India in 2023. Other tariff reductions include synthetic flavouring essences (from 100% to 20%), fish-based fertilisers (from 15% to 5%), and select scrap metal categories, a sector where the US exported $2.5 billion to India last year. These measures signal India’s willingness to facilitate business despite a complex global trade environment.
Historically, India has been one of the most protectionist economies. American political scientist Joseph Greco once described India as “one of the most restrictive governments in regulating foreign direct investment.” India’s share of world trade fell from 2.42% in 1948 to a mere 0.51% in 1991, as its inward-looking policies hindered global trade participation. The liberalisation of the 1990s and early 2000s marked a turning point, with average tariffs dropping from 80% in 1990 to 13% in 2008.
However, with the launch of the Make in India campaign, tariffs have risen to approximately 18%, making India a focal point in Trump’s “America First” policy. The US has been advocating for reciprocal tariff adjustments to address the trade imbalance, which could lead to further negotiations between the two nations.
Despite progress in multiple sectors, agricultural trade remains a contentious issue. India had removed tariffs on US imports of almonds, apples, chickpeas, pulses, and walnuts in 2023, but agriculture remains a politically sensitive sector in India. Given the substantial impact of the agrarian vote, the Indian government is likely to adopt a cautious approach when negotiating further concessions in this area. While India has shown a willingness to cooperate, it is expected to drive a hard bargain on agricultural products to safeguard domestic interests.
Trade is just one aspect of the complex US-India relationship. India’s recent decision to accept the deportation of undocumented Indian migrants from the US has been seen as a goodwill gesture, reinforcing diplomatic ties. Furthermore, Modi’s personal rapport with Trump is viewed as an asset in managing bilateral relations.