Numbers belie Trump's Tariff King claims

US President Donald Trump's numerous references to India during both his terms have had one fixed element. His steadfast and seemingly unshakable belief is that India is the world's "tariff king". On Tuesday evening (Indian time), Trump once again claimed that the US does very little business with India because of the high tariffs allegedly imposed by the world's fifth-largest economy.

This is indeed an accurate description of India's past, of the years before 1991, when it was indeed a closed economy.

But the India of the Trumpian imagination bears little resemblance to the actually existing India, whose current tariffs are fully in line with global norms for comparable emerging economies.

By one measure, the weighted average tariff, they are comparable with advanced economies.

India's simple average tariff, at 15.98 percent, is not particularly high and is comparable to large emerging markets.

However, using another measure known as the trade-weighted tariff, which considers the actual volume of imports, India’s average tariff is only 4.6%. That's below the 5% tariff applied by the European Union, which consists of advanced economies. The comparable tariffs for Vietnam and Indonesia, using the same methodology, are 5.1 and 5.7%. A trade-weighted tariff is a better estimate of the tariff actually paid, according to economists, as it considers the volume of imports.

Even using a simple average measure of tariffs, India is hardly the king. At just under 16 percent the protection level is comparable with Türkiye (16.2 percent) and Argentina and South Korea (both 13.4 percent).

Further, a large chunk of Indian goods is duty-free as they enter under treaty arrangements such as FTAs (free trade agreements) or are inputs into exports from Special Economic Zones (SEZ). This proportion is bound to go up with India entering into FTAs with major trading partners such as the UK and the European Free Trade Area (EFTA). An FTA with the EU is expected to be concluded in the current fiscal year.

In a strange twist, India's current average tariff is now about the same as the US. After several rounds of tariff increases under President Trump, the US average tariffs are at 18 percent, up from 2.4 percent at the start of his Presidency, and the highest level for almost a century. It could go higher still, given the threatened levies on semiconductors and pharmaceuticals.

Indian Tariffs were indeed very high at the end of the Cold War. They were 81 percent in 1990 and were cut to 56 percent in 1991 and then to 33% by the turn of the century, before declining to the current level of 15.98%.

Further, 45 percent of US exports to India -- these include crude oil, coal, and industrial machinery. Medical devices and aircraft parts face an average tariff of under 5 percent, according to government data. Indian duty on IT hardware, at zero percent, is more hospitable to US exports than China or Vietnam. India has recently cut tariffs on a wide range of items imported from the US, including Bourbon Whiskey and automobiles.

What may have created a perception about Indian tariffs being especially high is the fact that tariffs are indeed higher in sectors such as agriculture, dairy items, and automobiles. But the first two sectors are typically mollycoddled everywhere, notably in the US.

According to government data, India’s average tariff on agricultural items is 39 percent, which is lower than South Korea's 57 percent, and not especially out of line with Switzerland's 28 percent. Tariffs on agricultural items in the US, in some cases, exceed 100 percent.

The difference is that in India, 46 percent of the workforce is in agriculture, compared to the low single digits in advanced economies. It is politically impossible for India to move to a zero-tariff regime across the board in agriculture in the foreseeable future.

On Tuesday evening, Trump also threatened to substantially hike tariffs on India because India purchases Russian crude, which the US President claims is financing Russia’s war effort.

India needs to take a strategic and calibrated approach. India’s bilateral trade with the US was $131 billion ($87 billion of exports and $44 billion of imports). India’s total exports amount to $437.4 billion in FY25, so the US has a substantial 20 percent share in India’s exports.

Further, a substantial share of India’s services exports of $387.5 billion is absorbed by the US market. India’s incentive to reach a deal is clear. The US, for its part, would hardly want to be shut out of the world’s fastest-growing major economy and one slated to become the third largest before the end of the decade.