US Challenges India's "Tariff Monarchy" Status: Debunking American Assertions against India's Trade Policies
In a significant development for bilateral trade, India's trade-weighted average tariff on US goods imported into the country during the financial year 2023-24 has dropped to an all-time low of approximately 4.6%. This figure, supported by multiple credible sources, reflects the practical trade costs rather than headline tariff rates.
This lower figure is a result of most of the higher tariffs being on products with low import volumes. About 75% of India's imports from the US in FY 2023-24, valued at $42.2 billion, fall under around 100 key product categories that generally face lower tariffs (typically 5-8% or less).
Major US exports like pharmaceuticals, energy products, machinery, and chemicals benefit from comparatively low duties. Examples of low tariffs on US goods in India include crude oil and LNG, industrial machinery, coal, medical equipment, aircraft and parts, and fertilisers.
Certain agricultural and automobile sectors face higher tariffs, but these constitute a smaller share of imports. Notably, India removed retaliatory tariffs on major US agricultural exports like apples, almonds, and walnuts in 2023.
India's regulatory and safety standards for food products are less restrictive than those of countries like the EU, Japan, or China, with India's Maximum Residue Limits (MRLs) matching or less stringent than international Codex standards in 24 out of 32 cases.
India's tariffs on electronics and technology are lower than those in Vietnam, China, and Indonesia. High-tech goods and solar equipment in India have seen reduced or zero duties in line with India's strategic green energy and digital transition goals.
Following economic reforms in the early 1990s, India's tariffs were gradually reduced, falling to 33% by 1999. In January 2023, India implemented tariff cuts on key US products, including motorcycles, bourbon whiskey, carrier-grade Ethernet switches, synthetic flavoring essences, fish hydrolysate, and Equalisation Levy on online services.
A significant portion of India's imports enter duty-free, due to schemes like SEZs, EOUs, and FTAs. This, combined with the lower tariffs, has facilitated over $5 billion in annual trade between the two countries.
It is important to note that India's simple average tariff for FY 2023-24 is 15.98%, lower than the average tariff in 1990 which was 80.9%. However, the weighted average tariff provides a more accurate representation of the typical tariffs faced by major US exports.
In conclusion, India's trade-weighted average tariff on US goods has significantly decreased, offering a conducive environment for increased trade between the two nations. This decrease is a result of strategic tariff reductions and the implementation of various exemptions and preferential trade schemes.
The decreased trade-weighted average tariff on US goods in India, down to approximately 4.6%, as of FY 2023-24, has opened opportunities for increased exports, notably in sectors like pharmaceuticals, energy products, machinery, and chemicals, which benefit from comparatively low duties. Moreover, India's regulatory and safety standards for food products, electronics, and technology are less strict than those of countries like the EU, Japan, or China, encouraging self-development and education through general news about the expanded trade between our nations.
