What happened?
Amid President of the United States Donald Trump’s imposition of tariffs on Canada, Mexico, and China, the Government of India, in its Union Budget for the Financial Year (FY) 2025–26 presented on 2 February 2025, significantly reduced customs duties on high-end motorcycles, luxury cars, and smartphone components—a move that could benefit American companies like Harley-Davidson, Tesla, and Apple. Additionally, India has reportedly prepared a fact sheet for diplomats from the United States on tariffs for key American products to showcase that import duties on the top 30 items (led by crude petroleum, coking coal, aeroplanes, and liquefied natural gas) from the United States are all below 7.5% as a course correction to ‘correct bad optics.’
Why it matters to India:
Despite cordial ties between the United States and India, President Trump has often grouped India with China as a “tariff abuser” country. Notably, India’s move on tariffs comes on the eve of the likely visit of Prime Minister of India Narendra Modi to the United States in mid-February, which seems to have helped persuade the Trump administration not to impose tariffs on India as it has done with Mexico, Canada, and China. Amid President Trump’s tariff threats, India’s strategic duty cuts aim to boost domestic production while mitigating trade disruptions in an unpredictable global market. For instance, according to Chairman of the Central Board of Indirect Taxes and Customs (CBIC), Sanjay Kumar Agarwal, the rationalisation of tariff rates—reducing them from 15 to eight slabs, including the zero rate—should help “correct” the bad “optics” and send a clear signal to the world that “we are not a high-tariff country.”