For America, why India is not China
As Trump starts his second term, experts advise excluding India from tariffs, citing strong, mutually beneficial trade ties unlike those with China.
As Donald Trump begins his second term as United States (US) President, speculation is growing about the direction of his trade policy. He has consistently voiced concerns about America’s growing trade deficit and has called out the unfair trade practices of some of its trading partners. While the primary target of President Trump’s tariff moves has been China, he has made occasional noises about Indian trade practices.

If one looks closely at India-US trade data and the broader direction of the strategic relationship, it becomes clear that President Trump would do well to exclude India from tariff hikes because India-US trade relations are based on complementary strengths on fair terms and have been progressing well with substantial benefit to both countries. Relations between the two countries extend well beyond trade, as India has emerged as a long-term economic and geopolitical ally of the US. Here are the top 10 reasons why India is not China as far as trade with the US is concerned.
One, India’s merchandise trade surplus with the US is insignificant compared to China’s or those of other lower-cost economies like Vietnam and Mexico. India accounts for just around 4% of the US trade deficit of over $1 trillion, while China accounts for almost 25% of the deficit. In fact, India does not even figure among the top 10 US trading partners with whom the latter runs a high trade deficit.
Two, since India’s economic liberalisation, its trade relationship with the US has been progressing well, benefiting both countries. Goods trade between India and the US has grown over 20 times since 1991 to over $120 billion. US exports to India have grown at a Compound Annual Growth Rate (CAGR) of ~12% between 1992 and 2018 while US imports from India grew at a CAGR of ~11% in the same period. Services trade between India and the US has also been fair and synergistic with both countries increasing exports by similar amounts and the US deficit remaining constant at about $7 billion over the last decade. India’s robust services sector has driven operational efficiencies for US companies by exporting lower-value services, freeing up local talent to focus on high-innovation areas.
Three, while the US has understandable concerns around high Indian tariffs in some sectors like agricultural products and automotive, India has been on a consistent glide path to tariff reduction since 1991, a commitment that was reinforced by the new government in June last year. Moreover, India has begun focusing on products for which the US is a key supplier — such as aircraft, defence products, drones and critical technologies — and a supportive relationship would significantly grow such imports. Any outstanding issues on trade can easily be resolved through a well-established negotiation mechanism.
Four, the trade basket of India and the US is highly complementary and major Indian exports to the US — like textiles, gems, jewellery, and pharma ingredients — do not pose a strategic technology risk to the US, unlike exports from China. A large part of this production basket is not attractive for domestic US manufacturing due to high labour intensity or regulations around environmental protection for the production of certain chemicals.
Five, India, unlike China, has not used subsidies to artificially make its products more attractive for export markets. While China spends almost 1.75% of its Gross Domestic Product (GDP) on direct industrial subsidies (over $300 billion), India’s spending is insignificant at less than 0.25% of GDP on similar incentives (about $6 billion, a large proportion of which is targeted at small and medium enterprises with insignificant export contribution).
Six, unlike some other countries, India is not being used by China to circumvent US tariffs. There are strict controls on Chinese foreign direct investment (FDI) into India. As a result, China stood at 22nd position amongst all nations with only a 0.37% share ($2.5 billion) in total FDI equity inflows reported in India since April 2000.
Seven, India has avoided large-scale systemic challenges posed to the US economy with intellectual property infringement. Reports by the US Trade Representative have historically accused China of being responsible for the vast majority of counterfeit goods coming into the US. Data from OECD and EUIPO — based on analysis of seized counterfeit goods — found that 85% of such goods originated in China.
Eight, unlike China, which has imposed sanctions on American companies, the politico-economic environment in India does not discriminate against American companies. This divergence is visible in the market leadership of American companies in India — Google (vs Baidu in China), Uber (vs Didi in China), and Meta (vs WeChat in China).
Nine, India, in fact, shares the predicament of the US vis-à-vis China, incurring a goods trade deficit with China of $85 billion in FY24 (amounting to 2% of its GDP). Indian industry has been investing in capacity expansion and has the potential to be a partner for the US in case of increasing adversarial relationships with China.
Ten, the India-US relationship runs deep at the human capital level as well. The Indian diaspora in the US has been a visible and long-term partner in America’s growth journey — its tax contribution share (5-6%) is disproportionately higher than its population share (~1.5%). Through corporate leadership and entrepreneurship, members of the Indian diaspora have been job creators in the US.
Overall, India is a reliable strategic partner for the US with strong and mutually beneficial ties across trade, business and human capital. The two countries have shared concerns about trade and other practices of China. America will benefit greatly by not placing India in the same trade bracket as China.
Ashish Dhawan is founder-CEO and Piyush Doshi is operating partner,The Convergence Foundation.The views expressed are personal
