Trade relations between India and the United States have long been defined by a complex interplay of tariffs, non-tariff barriers, and regulatory challenges. The annual National Trade Estimate Report from the US Trade Representative (USTR) highlights the difficulties American businesses face in accessing the Indian market.At the same time, Indian businesses have raised concerns over restrictive US measures, prompting the Indian government to consolidate industry feedback into a formal grievance platform. As Washington and New Delhi work toward resolving trade tensions, both Prime Minister Narendra Modi and President Donald Trump are under growing pressure to address these issues.AdvertisementAmid this backdrop, President Trump is set to introduce a fresh wave of tariffs today, April 2, a date he has dramatically labelled as “Liberation Day.” The White House has confirmed that he will announce the details from the Rose Garden at 4 pm local time. For global audiences, this translates to 8 pm GMT, while Indian viewers tuning in live can expect the announcement around 1:30 am IST on April 3.More from India
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USAID funding under ED scanner over Soros link to Indian firmsAlthough Trump and his administration have not explicitly outlined the specifics of the tariff package, the move aligns with his broader goal of addressing what he perceives as unfair “trade imbalances” between the US and other nations—a stance that has repeatedly surfaced in his speeches and policy statements. There is no doubt that
US tariff news on India has been as closely watched as the ongoing IPL, with businesses and policymakers bracing for an unexpected googly or a bouncer.With the
Trump tariff war intensifying, the friction in India-US trade ties goes beyond new tariffs—long-standing concerns over market access and regulatory barriers continue to be sticking points.US concerns: High tariffs and regulatory hurdlesThe USTR’s annual report identifies India as a high-tariff regime country, with New Delhi’s average Most Favoured Nation (MFN) applied levy rate stood at 17 per cent in 2023, the highest among major global economies. The agricultural sector remains particularly affected, with average tariffs reaching 39 per cent and specific items like alcoholic beverages (150 per cent), natural rubber (70 per cent), and coffee and walnuts (100 per cent) facing exorbitantly high duties. However, for historical reasons, countries such as India are within their rights under the World Trade Organization (WTO) rules in levying high tariff on certain products.AdvertisementNon-agricultural goods, including automobiles, vegetable oils and processed foods are also subject to steep tariffs making market access challenging for US exporters.The USTR also views India’s trade policies as unpredictable and complaints about frequent changes in duties, retaliatory tariffs and non-tariff barriers—such as licensing requirements, government monopolies and opaque regulatory changes. Its report said such measures contribute to uncertainty for American businesses.The report refers to retaliatory tariffs of 1.7 per cent–20 per cent by India on 28 US products in 2019 after the US revoked its Generalised System of Preferences (GSP) benefits. These duties were, however, rescinded in 2023.As Washington pressures New Delhi to lower these barriers, the latest tariff move from Trump could either add strain to negotiations or force both sides back to the table for a broader trade resolution. The coming days will reveal whether this escalation leads to further confrontation or a recalibration of economic ties between the two nations.AdvertisementNew barriers: Digital economy and data localisationBeyond traditional tariffs and non-tariff barriers, the US has increasingly flagged concerns over India’s regulatory framework in the digital economy. The latest USTR report identifies issues related to internet shutdowns, open internet policies and stringent data localisation requirements.The Indian government mandates that financial and personal data generated within the country must be stored and processed locally, a measure US businesses argue increases compliance costs and limits cross-border data flow. However, New Delhi considers this requirement as a necessity to protect interests of Indian businesses and consumers alike.Additionally, India’s new regulations surrounding embedded SIM (eSIM) technology and roaming policies have also drawn criticism. American telecom and technology companies contend that these policies create market access barriers and increase operational challenges for global firms. The US is urging India to align its digital policies, something India has shown its reservations over.Non-tariff barriersBeyond tariffs and digital regulations, American exporters continue to grapple with India’s labelling, safety and certification norms. The Bureau of Indian Standards (BIS) mandates extensive quality control orders (QCOs) across multiple industries including chemicals, electronics and medical devices. The US businesses argue that these requirements create additional compliance costs and delay market entry. India argues that the BIS mandate is to protect consumer interests and applicable to all firms, domestic or foreign.AdvertisementSimilarly, India’s food and agriculture import policies remain a source of contention. The US has raised concerns over India’s slow approval process for genetically modified crops and non-science-based sanitary and phytosanitary (SPS) measures.The mandatory non-GMO certification for 24 agricultural products including those without genetically modified (GM) alternatives has been a bone of contention for US exporters. Other trade difficulties include restrictions on dairy imports, ethanol import bans and arbitrary health certification requirements for various food products.India Inc has a list of complaints tooWhile the USTR report extensively details the difficulties American businesses face in India, Indian exporters have their own list of complaints about US trade barriers. According to a Times of India report, the Indian commerce ministry has received 22 formal grievances from domestic industries regarding restrictive measures imposed by the US. Reports suggest New Delhi is developing a comprehensive platform to consolidate feedback and push for resolution through bilateral trade discussions.AdvertisementOne of the most significant barriers faced by Indian exporters is the high registration fees and stringent regulatory requirements imposed by the US Food and Drug Administration (FDA). Indian pharmaceutical and chemical companies have raised concerns over the prohibitive costs of obtaining FDA approvals, which often serve as a deterrent to market entry.The industry argues that while quality and safety regulations are essential, the excessive bureaucratic red tape disproportionately impacts small and medium-sized enterprises (SMEs) seeking to export to the US.Similarly, the US imposes stringent labeling and safety requirements on toy imports adding to compliance burdens for Indian manufacturers. Indian exporters contend that these measures, while ostensibly aimed at consumer protection, often serve as de facto trade barriers by making Indian products less competitive in the American market.Indian textile exporters have also expressed concerns over the US’s evolving sustainability norms and environmental regulations. American importers are increasingly required to ensure that their supply chains adhere to strict sustainability and carbon footprint standards.AdvertisementWhile the move towards eco-friendly trade is laudable, Indian businesses argue that the lack of harmonised international standards and the high cost of compliance put them at a disadvantage compared to competitors from developed nations.Another pressing issue is the US’s regulations on the origin of raw materials, particularly in the diamond and gemstone industry. Indian diamond exporters have flagged new requirements related to the country of mining origin as overly burdensome.Given that India is a major hub for diamond cutting and polishing, the industry is seeking greater flexibility in US customs regulations to maintain its competitive edge.Seeking resolution through bilateral engagementAmid these trade disputes, both nations have sought to resolve outstanding issues through platforms like the United States–India Trade Policy Forum (TPF). Established in 2005 and formalised in 2010, the TPF serves as the primary forum for trade and investment discussions between the two countries.The 14th ministerial-level meeting, held in January 2024 in New Delhi, focussed on key trade irritants, but many of the longstanding issues remain unresolved.As India and the US deepen their strategic partnership, resolving trade tensions will be crucial for fostering stronger economic ties. While India’s high tariffs and non-tariff barriers pose challenges for US exporters, America’s stringent regulatory measures also create hurdles for Indian businesses. Experts emphasise the need to adopt a balanced approach that promotes fair competition while addressing legitimate concerns related to quality, safety and sustainability.A call for pragmatic trade policiesIndia and US share one of the most dynamic trade relationships in the world with bilateral trade reaching $190 billion in 2023. However, persistent trade barriers threaten to limit the full potential of this economic partnership.As Prime Minister Modi and President Trump manage their challenges in their respective countries, there is an urgent need for pragmatic trade policies that address mutual concerns without resorting to protectionist measures.Addressing high tariffs, easing regulatory bottlenecks and ensuring greater policy predictability will be essential for fostering a more open and equitable trading environment. Whether the two leaders can find common ground remains to be seen, but businesses on both sides are eager for decisive action to remove barriers and unlock new opportunities for growth.A lot will depend what Trump unravels with his reciprocal tariff announcements at the White House’s Rose Garden on Wednesday afternoon in Washington DC or past midnight in the wee hours of Thursday, India time.TagsDonald TrumpEconomyGlobal economyIndiaIndian EconomyNarendra ModiUnited States of AmericaEnd of Article
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Barriers to business: What American and Indian businesses want Trump and Modi to do
