Should India adjust its trade balance to partially mitigate US tariff risks?

With the possibility of a monotonous 10% basic tariff regime by the United States, an additional tariff to be calculated on a formula based on the total exports of a common country according to the trade balance of a common country points to a basic change in global trade accounts. India was trying to make an agreement with the US, which would prevent these additional tariffs from kicking from 9 July onwards, but this does not seem possible. He says that Pussh Goyal is accompanied by a smiling photo, accompanied by a photo that is not under the threat of India’s deadline.

Is there anything that India can do to minimize tariff damage from the USA? A possible line of thought that can be discovered is to reduce trading surplus with the US even if it includes import costs. The basic hypothesis is simple but provocative and due to the proposed tariff determination formula of US administration, ie

Tariff Ratio (Country X) = Basic Tariff (10%) + Adjustment Factor (X’s Trade surplus with the United States ÷ Total US imports)
This formula predicts a higher adjustment factor than higher trade. One way to reduce this is to reduce trade surplus by importing more than the US, even if the imported goods are a little more expensive than the imported. India’s strategic advantage is to be a country that imports globally clearly – with a trade deficit of approximately 240 billion dollars in 2023-24 financially – to make rooms for maneuver.

According to official reports, the trade of goods between the two countries was estimated in 2024 was an estimated $ 129.2 billion. Indian exports were collected in 2024 up to 87.4 billion dollars. This amount was an increase of 4.5 percent of the previous year’s exports. The goods imported from the United States were 41.8 billion dollars in 2024. This implies that India witnessed a surplus of $ 45.7 billion in the trade of goods with the United States. From the data, it can be observed that India has a trading surplus rate of 0.5 (ie 50%) for 2024, which is a good sign for economic growth, business creation and the power of currency.

So, what could be India’s strategy? There are two possible strategies that can be considered. The first option of exploring may be the diversity imported to the USA. India may try to increase its imports from the US – especially in the sectors of structural dependencies or in sectors that have scope for productivity improvements. In 2023, imports from the USA, existing attractive opportunities and expansion in various sectors. For example, oil and gas imports of $ 11.6 billion at the moment can be increased in accordance with India’s energy diversification strategy. In the aviation industry, aircraft and machine imports worth $ 5.2 billion are likely to grow further as the country’s aviation industry continues to expand. Electronic and semiconductors record less than $ 2 billion. This sector also offers the scope of growth by the application of production (PLI) schemes related to production focusing on increasing domestic electronic production. Similarly, the import of medical equipment, which is currently 1.3 billion dollars, can be expanded to support the ongoing development of India’s health infrastructure. Considering these trends, a applicable strategy for India will be to diversify and increase imports from the USA in sectors where there are open opportunities for existing addictions or efficiency improvements. An increase of 10-15 billion dollars in imports from the United States will increase India from 50% to 33%, and will increase more than 50%. 13.3 %.

A second strategic option for the government will be a trade diversification. India can see if it is possible to diversify some of its exports from the US to third countries (eg, EU, ASEAN, Africa) at the same time and shift some imports from countries such as the USA to the USA.

If India maintains its trade diversity, it can establish a better balance in its general trade. It can also address critical geopolitical addictions in global trade. By spreading its exports to a wider range of markets – it reduces the risk of relying not only the US but a single market. At the same time, to remove some import sources from countries such as China, will facilitate regulatory requirements by providing a smoother way to domestic input suppliers under US compliance regimes.

The advantages of these strategies are that we will be able to reduce additional tariff exposure by reducing the surplus of trade and thus help Indian exporters to maintain their competitiveness in the US market. Increased US imports can strengthen India’s access to clean energy technology, critical semiconductors and advanced machines. And finally, such a proactive harmony can be sold as an attempt to reduce India’s trade balance, thus deepening Indo-US strategic partnership. In addition, creating space for potentially dual carving or exemptions.

However, certain disadvantages and consequently did not come without criticism. Registration for US suppliers can increase costs – US goods are generally priced higher than Asian alternatives. For example, the US LNG Landed adds 15-25% higher than Russian alternatives. In addition, some US exports may not be easily substituted for inputs supplied elsewhere due to compliance or volume. In addition, an increase in the increase in high valuable imports from the United States has a danger of short -term deterioration, as it can worse the general current account deficit of India, even if it is temporarily. And finally, if the US again changes in the tariff policy, it may be unnecessary to restructure India.

However, India’s structural trade flexibility offers a strategic tool to minimize the damage caused by a developing US tariff regime. By-particularly higher valuable, strategically aligned imports with the United States, the trade balance can produce moderate diplomatic and economic dividers moderately between 15% and 12% to 12-13%. This is a calculated bet. Although there are short-term costs, including possible higher import invoices and changing supply chains, wider return-tariff penalties can justify the deepened binary confidence and a more balanced trade portfolio. India’s policy makers should remain agile using data -oriented calibration and sectoral targeting to do this exchange work.

Author President, Chintan Research Foundation