India could be among the economies that will take a hit due to US President Donald Trump’s latest reciprocal tariffs, even as the two countries begin negotiations to address trade deficit issues.
The United States of America is India’s top export destination, and single-handedly made up for 18.7% of India’s merchandise exports in FY25, at $52,905 million for the first eight months of the ongoing fiscal, according to data from the Ministry of Commerce and Industry.
USA was India’s fourth largest importer, accounting for 6.3% of all merchandise imports, amounting $29,632 million in the first eight months of the ongoing fiscal.
USA’s merchandise trade deficit amounted to $23,262 million in the April-November period of the ongoing fiscal.
In FY24, the merchandise trade deficit amounted to $35,319 for the full fiscal.
Electrical machinery and equipment was the largest export category to the USA in FY25, along with precious gems and jewellery, and pharmaceuticals.
On imports, India’s key merchandise imports include petroleum products, coal and gas, along with precious gems, electronics and machinery.
Negotiations on the India-US trade deal will start, and some concessions are likely. But given India’s higher tariff rate, high non-tariff barriers and its trade surplus with the US, it remains in Trump’s line of fire on reciprocal tariffs, stated a research note by Nomura.
“We expect India’s purchase of US energy to increase over time, while Russia’s share may fall, which will alter the composition of its energy imports and trade balance,” said Sonal Varma and Aurodeep Nandi, India economists at Nomura.
Over the medium term, India is expected to encourage cheaper imports and invite US investment in key sectors, in line with its ‘Make in India’ initiative, according to Nomura. “We continue to expect India to benefit from the ongoing supply-chain relocation,” the economists said.
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