As the April 2 deadline for the imposition of US reciprocal tariffs looms, several American industry associations and corporations are intensifying pressure on the Trump administration to urge India to reduce its trade barriers. The demands span a wide range of sectors from pharmaceuticals and agriculture to digital services and e-commerce, highlighting the complex nature of India–US trade relations.
Key US business associations such as the United States Chamber of Commerce and the Coalition of Services Industries, along with influential companies like Harley-Davidson, have presented detailed submissions to the US Trade Representative (USTR). These documents accuse India of maintaining high tariffs, regulatory bottlenecks, and protectionist policies that restrict access for American goods and services.
Sectors under scrutiny include pharmaceuticals, digital platforms, agricultural produce, and advanced medical devices. The US currently remains India’s largest export destination, with bilateral trade in goods valued at around $77 billion in FY 2023–24. But reciprocal tariffs being considered by Washington could significantly impact up to $80 billion of India’s exports, particularly in gems, jewellery, electronics, and pharmaceuticals.
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Reciprocal tariffs: US industry demands
The USCC is lobbying for reduced tariffs on American pharmaceutical products, arguing that India’s tariff regime and price controls, such as those under the National List of Essential Medicines, deter innovation and foreign investment. It is also pushing for reforms to allow the import of refurbished medical equipment like CT scanners and surgical systems, and for provisions encouraging dual-location manufacturing to boost supply chain resilience.
The US industry has also flagged India’s GST classification of non-alcoholic aerated beverages as “sin goods,” which attracts a 28% tax. American companies say this deters business growth and investment in the Indian food and beverage sector.
The CSI, representing firms such as Amazon, Google, and Mastercard, raised objections to India’s local content mandates and regulatory preferences given to platforms like Unified Payments Interface (UPI) and RuPay. These practices, it argued, disadvantage foreign service providers and distort market competition.
Similarly, American e-commerce players have criticised high import duties and strict customs clearance procedures. Apparel exporters have complained about restrictive quality control orders that discourage US firms from entering the Indian market.
India has scrapped the 6% equalisation levy on digital advertising services starting April 1, 2025. This so-called “Google tax” has been in place since 2016 and targets offshore digital giants such as Google and Meta. The decision follows last year’s repeal of a separate 2% levy on e-commerce platforms and is seen as a step towards aligning with the OECD/G20 global digital tax framework. The removal of the equalisation levy could help defuse bilateral tensions and pave the way for more constructive negotiations around a comprehensive trade deal.
India plans major concessions
Washington is pressing India to join a public procurement agreement to allow reciprocal access to government contracts. The US is also calling for further liberalisation of India’s state-owned enterprises and a reduction in local content requirements across critical sectors.
According to official sources, India is weighing a significant tariff reduction on over half of US imports—worth approximately $23 billion—as part of the initial phase of a potential trade agreement. These tariff cuts could be the biggest in years and are aimed at pre-empting or offsetting the impact of the upcoming reciprocal tariffs. India is reportedly considering eliminating or substantially reducing tariffs that currently range from 5% to 30% on many US goods.
However, Indian negotiators are making it clear that such concessions hinge on obtaining relief from the reciprocal tariff threat. A wider reform to lower tariffs across the board is also under discussion but remains in preliminary stages.
Strategic focus on industrial goods
India’s strategy is to focus negotiations on industrial tariffs. It has been recommended that India remove duties on up to 90% of industrial tariff lines, conditional on a reciprocal US commitment, while steering clear of sensitive areas such as agriculture, intellectual property rights, digital trade, and government procurement.
Concerns have also been raised domestically about the implications of easing norms for foreign giants like Tesla and Amazon, with warnings that such moves could compromise national interests and hurt domestic industry.
Reciprocal tariffs of 10–15% could severely impact India’s price-sensitive export sectors, particularly in electronics, machinery, and fuels. If the US applies such across-the-board tariffs, some Indian products may be priced out of the American market entirely.
India has identified pearls, mineral fuels, machinery, and electrical equipment—products that form the bulk of Indian exports to the US—as being particularly vulnerable. An internal assessment indicates that up to 87% of India’s exports to the US could be affected.
US negotiators are likely to push hard for a comprehensive digital trade chapter in the proposed Bilateral Trade Agreement (BTA), addressing issues such as data localisation, cross-border data flows, and fintech regulations. India, in return, is expected to seek more predictability and relaxation in US visa regimes for high-skilled technology professionals, which has long been a priority.
India’s measured concessions
India has already signalled flexibility in certain areas. In its 2025–2026 Union Budget, the government announced tariff cuts on items like bourbon whiskey, electric vehicles, and wines—moves widely seen as confidence-building gestures toward the US.
Officials from the Indian Commerce Ministry have stated that while reciprocal tariffs on other countries could open up new export avenues for Indian firms, the government remains alert and ready to take timely action to shield Indian exporters from adverse impacts.
Both countries have agreed to finalise the first tranche of a broader BTA by fall 2025. However, trade experts believe that negotiations may stretch into 2026 or 2027 due to the complexity of the issues involved.
The ongoing visit of Brendan Lynch, Assistant US Trade Representative for South and Central Asia will be critical in shaping the contours of the emerging trade deal. While both sides express optimism, the threat of tariffs remains a potent bargaining chip for the Trump administration.