India's trade surplus with the US lowest among other nations, as President Trump starts tariff war

Trump tariffs won't yield much from India

India could be among the nations hit by higher tariffs if the US President Donald Trump turns his eyes to other nations to impose further tariffs as he starts to balance trade in favour of his country.

The US President on February 1 signed executive order imposing 25 percent tariff on Canada and Mexico, and 10 percent tariff on China. Energy imports from Canada would attract 10 percent tariff.

A Moneycontrol analysis shows that India could also face the ire of the new President as the average tariff gap is 11.9 percent across over 3,000 products traded between the countries.

The tariff gap is the difference between tariffs imposed by India on US imports and those imposed by the United States on Indian exports to the country. Around 10 percent of India's exports to the US attract over 10 percent tariff.

However, India’s trade surplus, or difference between exports and imports with the US, was one of the lowest among these nations. While China, Mexico, and Vietnam had a trade surplus of over $100 billion with the US, India’s was just $43 billion in 2023. Indonesia’s was lower, $17 billion, but as a percentage  of the total trade, it was higher than India’s.

An analysis of World Bank data shows that US’ tariff gaps with other nations is much lesser than India’s.

In the case of China, the tariff gap is 3.5 percent, while it is 8 percent with Vietnam, 7.2 percent for Indonesia, and 6.8 percent with Mexico.

The number of items with a negative tariff gap is also higher for all other countries, except India and Mexico.

A negative tariff gap indicates that tariffs imposed by the US were more than those imposed by the other country for the same product.

In case of India, the US imposed higher tariffs on 25 products compared to what India imposed on the same when importing from the US.

For instance, while India imposed a 30 percent tariff on tobacco imports from the US, the US slapped a 60.3 percent tariff on tobacco exports from India entering its territory.

An analysis of World Bank data also found that 623 of the 3,643 items traded between the US and China had a negative tariff gap.

Nearly 300 products traded between Vietnam and the US attracted higher tariffs from the US than Vietnam. This figure was 90 for Indonesia, and one for Mexico.

Wines, whiskies, coffee, and cars 

A tariff war with India is unlikely to yield meaningful gains for the US.

An earlier Moneycontrol analysis shows that even if the US were to corner the entire market for products which attract over 40 percent tariff, it would only gain just $5 billion in exports.

The US exports to India that attract tariffs of over 100 percent include alcoholic beverages like rum, tafia, wine,  beer, roasted coffee, green tea, vegetable oil, cars, and motorcycles.

Tariffs on vehicles could be a flash point between the two nations, given that Tesla is yet to break into the Indian market. Elon Musk, an advisor in the present US dispensation, is the CEO and largest individual shareholder of Tesla.

In his previous term, Trump had threatened higher tariffs on India for levying more duty on the import of Harley Davidson motorcycles.