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The assertion by former US President Donald Trump that India is a “Tariff King” and an “abuser” of trade duties is a significant claim that warrants careful examination. This label suggests that India unfairly protects its markets by imposing excessively high customs duties, thereby hindering international trade and disadvantaging foreign exporters, particularly those from the United States. However, a detailed analysis of trade data, tariff structures, and international comparisons reveals a more nuanced picture, suggesting that Trump's characterization is an oversimplification and, in some respects, inaccurate. This essay will delve into the complexities of India's tariff policies, contrasting the simple average tariff rates with trade-weighted averages, examining specific examples of tariffs on US goods, comparing India's tariffs with those of other countries, and tracing the historical trajectory of tariff reductions in India. Furthermore, it will address non-tariff barriers and, importantly, highlight the tariffs imposed by the United States itself, providing a balanced perspective on the issue. The overarching aim is to provide a comprehensive and objective assessment of India's tariff regime, challenging the “Tariff King” narrative and presenting a more accurate representation of India's trade practices in the global context.
One of the primary points of contention revolves around the distinction between simple average tariffs and trade-weighted average tariffs. The simple average tariff, which assigns equal weight to every product, regardless of its trade volume, can be misleading. In India's case, the simple average tariff is approximately 15.98%. However, this figure does not accurately reflect the duties actually paid on traded goods. The trade-weighted average tariff, which measures the actual duties paid based on trade volume, provides a more realistic assessment. According to World Bank data, India's trade-weighted average tariff is only 4.6%, significantly lower than the simple average suggests. This discrepancy indicates that many of India's higher tariffs are applied to sectors with relatively low import volumes, such as agriculture and automobiles. Conversely, the bulk of US exports to India, including pharmaceuticals, energy products, machinery, and chemicals, face much lower duties, typically in the range of 5-8%, according to official data. This nuanced understanding of the tariff structure is crucial for accurately assessing the impact of India's tariff policies on international trade. The fact that a substantial portion of India's imports enter duty-free further complicates the “Tariff King” narrative. Various schemes, such as Special Economic Zones (SEZs), Export-Oriented Units (EOUs), and Free Trade Agreements (FTAs), facilitate duty-free imports, contributing to a lower overall tariff burden on traded goods. These schemes are designed to promote exports, attract foreign investment, and stimulate economic growth, and they play a significant role in shaping India's trade landscape.
To further illustrate the reality of India's tariffs on US goods, it is essential to examine specific examples. In the fiscal year 2023-24, India imported over $42.2 billion worth of goods from the United States. Nearly 75% of this trade comprised only 100 key product categories, and the majority of these faced low or minimal tariffs. For instance, crude oil and liquefied natural gas (LNG), which accounted for 18.25% of US imports to India, faced import duties of Rs. 1.1 per tonne and 2.75%, respectively. Industrial machinery, representing 9.75% of imports, faced a tariff of 7.5%. Coal, contributing to 8.8% of imports, was subject to a 5% duty. Medical equipment, with a 4.6% import share, faced duties between 5% and 7.5%. Aircraft and parts, accounting for 3% of total imports, enjoyed a low tariff of 2.5%. Even fertilizers, with a 1% import share, faced tariffs ranging from 7.5% to 10%. These examples demonstrate that many of the key US exports to India face relatively low tariffs, challenging the notion that India imposes exorbitant duties across the board. Moreover, it is important to consider how India's tariffs compare to those of other countries, both developed and developing. Data from the World Trade Organisation (WTO) reveals that India's tariffs are far from extreme when compared to other nations. In the electronics and technology sector, India imposes a 0% tariff on most semiconductors, IT hardware, and computers, whereas Vietnam, China, and Indonesia impose tariffs of up to 50%, 25%, and 30%, respectively. In the agricultural sector, while India's average tariff is 33%, with a maximum of up to 110-150%, the European Union imposes tariffs of up to 261%, Japan up to 298%, and South Korea over 800% on some items. Furthermore, while India's simple average tariff stands at 15.98%, as per the WTO, this figure is within the range of tariffs maintained by other developing nations, such as Bangladesh (14.1%), Turkiye (16.2%), and Argentina (13.4%). India's weighted average of 4.6% is lower than Vietnam (5.1%) and Indonesia (5.7%) and nearly equal to the European Union (5%).
It is also crucial to recognize that India has been actively reducing tariffs for decades as part of its broader economic liberalization efforts. In 1990, India's average tariff was as high as 80.9%. Following economic reforms in the early 1990s, tariffs were gradually reduced, falling to 33% by 1999. By 2023, India's simple average tariff had dropped further to 15.98%, while the trade-weighted average stood at 4.6%. This historical trend demonstrates a clear commitment to reducing trade barriers and integrating more closely with the global economy. More recently, in January, India implemented further tariff cuts on key US products, including motorcycles, bourbon whiskey, carrier-grade Ethernet switches, synthetic flavoring essences and mixtures, and fish hydrolysate. Additionally, India abolished the Equalisation Levy on online services, a move that is particularly significant for US tech firms. In 2023, India also removed retaliatory tariffs on major US agricultural exports like apples, almonds, and walnuts after resolving trade disputes. These recent tariff reductions underscore India's ongoing efforts to strengthen economic ties with the United States through deliberate tariff concessions. Beyond tariffs, it is important to consider non-tariff barriers, which can also significantly impact trade. However, in this regard, India's regulatory and safety standards are generally less restrictive than those of countries like the EU, Japan, or China. For example, India's Maximum Residue Limits (MRLs) for food products are either matching or less stringent than international Codex standards in 24 out of 32 cases, compared to only 15 out of 52 MRLs in Japan and 6 out of 58 in the EU. India's rules on biotech products and veterinary health certification are designed to be transparent, science-based, and consistent with global norms. In contrast, China has over 2,600 non-tariff measures (NTMs), many of which are complex, unpredictable, and create difficulties for foreign exporters. Therefore, when considering non-tariff barriers, India's trade regime appears relatively open and transparent compared to some of its major trading partners.
Finally, it is essential to acknowledge that the United States itself imposes very high duties on several important products, challenging the notion that it is a champion of free trade. These tariffs, many exceeding 100%, are applied across a range of products, including dairy, agriculture, textiles, and autos, reflecting deep-rooted domestic concerns similar to those seen in countries like India. For example, the United States imposes an average tariff of 197.04% on sour cream, with rates going up to 297.79%. Tobacco faces an average tariff of 183.87%, with a maximum of 350%. Peanuts are subject to an average tariff of 114.80%, with rates up to 163.8%. Even cheese and automobiles face average tariffs of 23.98% and 19.28%, respectively. These examples demonstrate that the United States also employs high tariffs to protect its domestic industries, particularly in sensitive sectors like agriculture. Furthermore, developed countries like Switzerland (28.5%), Norway (31.1%), and South Korea (57%) also maintain very high agricultural tariffs, often exceeding India's levels, underscoring that protecting agriculture is a global norm. India's tariff policy, especially in agriculture, is thus in line with international norms aimed at safeguarding domestic farmers and ensuring food security. In conclusion, the assertion that India is a “Tariff King” is an oversimplification that does not accurately reflect the complexities of its trade policies. While India's simple average tariff may appear high, its trade-weighted average tariff is significantly lower and comparable to those of other developing nations. India has been actively reducing tariffs for decades and has implemented recent tariff cuts on key US products. Moreover, India's non-tariff barriers are generally less restrictive than those of many other countries. Finally, the United States itself imposes high tariffs on various products, demonstrating that protectionist measures are not unique to India. A balanced and objective assessment of India's tariff regime reveals a more nuanced picture than the “Tariff King” narrative suggests, highlighting the need for a more informed and evidence-based understanding of India's trade practices in the global context.