India Caught In US Trade Crossfire

THE TAKE 

India And The US: Trading Promises, Not Progress?

It must be a matter of some irony that even as the Trump administration was attempting to thrust a Lockheed Martin F-35 fighter jet down India’s throat, a video of a Russian Su-57 fifth-generation fighter jet performing reverse and side thrusts at the Bangalore Aero Show last week was going viral.

It helped—or perhaps didn’t—that the test pilot was Sergey Bogdan, all of 62 years old, quite like Top Gun’s Maverick, played by Tom Cruise, who was 57 in the film and 59 when it was released three years ago.

Bogdan himself claimed that some of the manoeuvres in Top Gun, particularly the "intense nose spin", were inspired by Russian dogfight procedures.

Meanwhile, The F35 Lightning II was in Bangalore too and put on a handsome display by all accounts but there was no viral video since these things are often an indicator of popularity or even existence.

So, will India buy F-35s because of Trump’s insistence? We obviously don’t know, but it seems very unlikely.

It is also a fact that India’s defence requirements have been closely tied to Russia for over 60 years.

Fighter Jets, Trade Deals, And The US-India Tug-of-War

Meanwhile, following a meeting between President Donald Trump and Prime Minister Narendra Modi, there appears to be no immediate threat of blanket tariffs on Indian exports to the US. 

Trump has instead spoken about reciprocal tariffs, which would be imposed country by country and would take time to implement.

Columnist Shankkar Aiyar highlights that the reciprocal tariff threat is deeply complex—the US Harmonised Tariff Schedule for 160 countries is spread over 98 chapters and contains more than 18,000 ten-digit codes for imports. 

Imagine trying to implement this alongside the promised purge by the Department of Government Efficiency.

The US currently runs a $45.6 billion trade deficit with India. While the US trade-weighted average tariff rate stands at 2.2%, India's is significantly higher at 12%.

It remains to be seen how tariff wars could unfold in this scenario.

Tariffs, Trade Uncertainty, and the Industries at Risk

The Indian alcoholic beverage industry has fired what could be the first shot in response to the government's move to reduce customs duties on bourbon whiskey imported from the US—cutting them from 150% to 50%.

The Industry now wants states in India to withdraw excise concessions on imported liquor, as lower customs duties would lead to cheaper imports, hurting Indian producers of premium whiskey.

Similar scenarios are likely to play out across other industries where India has reduced import duties, just as they will in the US, but in reverse. 

In America, higher tariffs will push prices up, making it harder for local manufacturers—such as those importing bulk drugs from India and converting them into medicines for retail.

These trade dynamics and market shifts are not unusual, except that this time they are happening all at once across multiple industries.

What makes this more worrisome is the uncertainty, the daily threats, and the shifting goalposts.

It’s unclear what the final trade deal between the two countries will actually look like, despite its stated goal of more than doubling bilateral trade to US $500 billion this decade—or does that mean in a decade?

India has promised to buy more US defence equipment, energy, and other products. And of course, to allow cheaper whiskey and high-end Harley-Davidson bikes.

Perhaps Tesla cars will also see little to no import restrictions, because, as it appears from here, what must be good for Tesla CEO Elon Musk must be good for America, and vice versa.

In 2024, India exported goods worth US $73.8 billion to the US, including medicines, telecom instruments, jewellery, petroleum products, garments, and engineering goods.

Ajay Srivastava, founder of New Delhi-based think tank Global Trade Research Initiative and a frequent guest on The Core Report, told Reuters that for nearly 75% of US exports to India, such as petroleum products and chemicals, average tariffs are already below 5%. 

As a result, a trade deal scrapping duties is unlikely to be a major concern.

Maybe there will be opportunities in this, maybe not.

Beyond Politics, Business Finds Its Own Path

Meanwhile, American companies continue expanding in India, whether in manufacturing, services, or to cater to the domestic market.

Last month, US pharma major Eli Lilly and Company announced its new Global Capability Centre (GCC) in Hyderabad—its second such facility in India. 

The company said the new centre will strengthen its digital strategy and service delivery while employing over 1,000 highly skilled professionals. 

The centre is expected to be operational later this year, while the first one opened in 2016.

While Trump and his team continue to use a carrot-and-stick approach in negotiations with nations—including India—American companies are doing what’s in their best interest: investing in the Indian market and its people.

So, while a 62-year-old Russian pilot showing off daring manoeuvres may impress Indian netizens—and perhaps help clinch a few more defence deals—the rest of the sky remains wide open for both India and the US.

CORE NUMBER

Rs 21,272 crore

Foreign Portfolio Investors (FPIs) have offloaded Rs 21,272 crore from Indian equities so far in February, pushing the total outflow in 2025 to nearly Rs 1 trillion, PTI reported. This selling spree follows Rs 78,027 crore pulled out in January. Global trade tensions—exacerbated by U.S. tariffs on steel and aluminium—have triggered risk aversion among FPIs, leading them to cut exposure to emerging markets like India. Domestically, weak corporate earnings and a depreciating rupee have further dampened investor sentiment. In contrast, FPIs have remained net buyers in the debt market, signalling a shift toward safer investment avenues amid growing volatility.

THE CORE x TALENT SKILLVARSITY

The Executive Program in Business Journalism & Economic Reporting trains professionals in financial markets, economic reporting, and multimedia tools. Learn investigative techniques and AI-driven storytelling to thrive in modern media.

Visit Talent Skillvarsity for more information.

👥 THE TEAM

✍️ Zinal Dedhia, Salman SH | ✂️ Rohini Chatterji | 🎧 Joshua Thomas