New Delhi:
India is poised to face economic challenges due to US President Donald Trump’s initiative to rectify bilateral trade imbalances through potential reciprocal tariffs, cautioned Zoho founder Sridhar Vembu. He indicated that in light of Trump’s threats, India will soon be required to boost its imports from the US to achieve a balance in trade, which may increase pressure on New Delhi’s current account deficit unless domestic production can be scaled up rapidly.
“To simplify things a bit, India primarily exports software services to the US while importing consumer goods from China. The surplus with the US is significantly offset by the deficit with China,” Mr. Vembu explained in a post on X.
“Consequently, India will (need to) import more items like iPhones, GPUs, LPG, nuclear plants, fighter jets, whiskey, and more from the US to rectify the trade balance,” he added.
He remarked that this adjustment could elevate India’s current account deficit unless domestic manufacturing is accelerated quickly.
“To avoid worsening the current account deficit, India must devise strategies to decrease consumer goods imports from China, which necessitates increasing local production. Given that this won’t occur overnight, imported consumer goods prices might rise in the short term, leading to inflation,” he noted, urging Indian manufacturers to expand their capacity and “acquire the necessary expertise as required.”
To simplify things a bit, India primarily exports software services to the US while importing consumer goods from China. The surplus with the US is significantly offset by the deficit with China.
Consequently, India will (need to) import more iPhones, GPUs, LPG, nuclear plants, fighter…
— Sridhar Vembu (@svembu) February 15, 2025
India’s Trade With US And China
Since the onset of the Covid-19 pandemic, India’s trade surplus with the US has doubled, rising from $17.30 billion in 2019-20 to $35.33 billion in 2023-24, along with a significant shift in the export composition. While electronic and engineering exports saw substantial growth, traditional exports like gems, jewelry, and garments remained relatively stable.
Conversely, India’s trade deficit with China reached $85.1 billion in the fiscal year 2024, with imports from China experiencing a 9.8 percent year-on-year increase from April to October 2024. China continues to be India’s primary source of imports, totaling $65.89 billion during that timeframe.
The situation raises growing economic concerns, as exports to China plummeted to merely $8 billion during this same period.
Trump’s Threats
Mr. Trump recently warned that “America will impose a RECIPROCAL Tariff, meaning whatever tariffs other countries impose on the United States, we will impose the same – no more, no less!”
Previously, on Friday, emphasizing the trade imbalance between Washington and New Delhi, the US President stated that India’s tariffs — which can be as high as 70 percent on American goods like automobiles — pose a “significant problem.” He pointed out that US sales of oil and gas can help mitigate the American trade deficit with India.
“India applies tariffs of 30, 40, 60, and even 70 percent on numerous goods, and in some cases, even higher. For instance, a 70 percent tariff on US cars entering India practically renders those cars unsellable. Currently, the US trade deficit with India is close to $100 billion, and Prime Minister Modi and I have agreed to negotiate solutions to the long-standing disparities,” he conveyed during a press briefing with Prime Minister Narendra Modi.
“We seek a level playing field, which we believe we are entitled to, and so does he, in fairness. We will be working intensively on this matter, and we can easily make up for the deficit through sales of oil and gas, LNG, of which we have an abundance,” Mr. Trump added.
