Introduction

India–U.S. relations are among the most significant of the 21st century, spanning defence, technology, and trade. However, trade frictions, tariffs, and protectionist policies have strained this partnership, threatening to overshadow broader strategic cooperation.

Trade Tensions & Recent Developments India US Relations

The U.S. has long criticised India’s tariff policies, calling them restrictive. In 2019, the U.S. ended India’s benefits under the Generalized System of Preferences (GSP), affecting exports worth over $5 billion. In August 2025, the U.S. imposed 50% tariffs on Indian exports, affecting sectors like textiles, leather, gems, shrimp, and machinery. This impacted nearly 55–60% of India’s exports to the U.S., worth about $48 billion annually. Industry hubs such as Tirupur and Surat reported job losses, while the rupee hit record lows. The U.S. linked its decision partly to India’s continued oil trade with Russia, intensifying the strain.

India’s Response

Unlike earlier disputes, India avoided tit-for-tat tariffs. Instead, it adopted a multi-pronged strategy:

• Implementing GST 2.0, cutting rates on consumer goods to boost demand.
• Announcing relief packages for exporters and credit support for affected industries.
• Diversifying export markets in Africa, Latin America, and Southeast Asia, while exploring new opportunities in pharma exports to China.
• Stabilising the rupee through RBI interventions.
• Continuing strategic engagement, including the largest-ever Indo-U.S. joint army exercise in Alaska, signalling that security ties remain intact.

Challenges
Persistent disputes over market access, digital trade taxes, and agricultural imports could deepen mistrust. Rising U.S. protectionism and India’s energy autonomy further complicate relations. The risk is that trade frictions spill over into security and technology cooperation.

Way Forward
Both sides must separate strategic ties from trade tensions. Reviving trade talks, negotiating a bilateral trade pact, and using the WTO platform for dispute resolution are necessary. Mutual concessions, especially in sensitive sectors, can restore balance.

Conclusion
Trade tensions have strained India–U.S. relations, but they need not define them. By adopting reforms, diversifying markets, and keeping dialogue open, India has shown resilience. For two major democracies with shared global interests, resolving economic frictions is vital to preserve a partnership that extends well beyond trade.