Tariffs and Trade Tensions: Unpacking US-India Economic Tango

Hidden $85 Billion Surplus for US in Trade with India Misses Trump Attention

By P. Sesh Kumar

NEW DELHI, May 30, 2025 – The US-India trade relationship, often portrayed through the lens of deficits and surpluses, is more intricate than surface-level statistics suggest. While official US figures highlight a significant trade deficit with India, deeper analysis reveals a complex interplay of goods, services, and capital flows that challenge this narrative.

Recent legal developments, particularly the US Court of International Trade’s ruling against former President Donald Trump’s tariffs, have further complicated the discourse.

The Surface Narrative: A Deficit in Goods

Official US trade statistics for the fiscal year 2024–25 indicate a trade deficit of approximately $44.4 billion with India, based solely on goods trade. This figure has been a cornerstone of the US administration’s argument for imposing tariffs and seeking more favourable trade terms. President Donald Trump, in particular, has cited this deficit to justify his tariff policies, labelling India as a “tariff king” and accusing it of exploiting trade relations.

Beyond Goods: The Hidden Surplus

However, this deficit narrative omits significant components of the bilateral economic relationship. The Global Trade Research Initiative (GTRI) highlights that when services, investment income, and other financial flows are considered, the US actually enjoys a substantial surplus with India. Specifically, the US earns an estimated $80–85 billion annually from India through sectors such as education, digital services, financial operations, intellectual property royalties, and defence sales. This broader perspective suggests a US surplus of $35–40 billion when these factors are included.

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Legal Challenges: The Tariff Turmoil

The US Court of International Trade’s recent ruling in V.O.S. Selections, Inc. v. United States declared that President Trump’s tariffs, imposed under the International Emergency Economic Powers Act (IEEPA), exceeded presidential authority and were thus unlawful. The court emphasized that the IEEPA does not grant the president unlimited tariff-setting powers, especially in the absence of clear congressional authorization. While the Trump administration has appealed the decision, and a federal appeals court has temporarily stayed the lower court’s ruling, the legal foundation of these tariffs remains precarious.

India’s Strategic Calculus

In light of the court’s decision, India is reassessing its approach to trade negotiations with the US. The ruling provides India with greater leverage, allowing it to resist entering agreements shaped by threats or undue pressure. Trade experts, including those from GTRI, advise India to proceed with caution, ensuring that any trade deal is balanced and reflective of the full spectrum of bilateral economic interactions.

The Road Ahead: Negotiations and Nuance

Despite the complexities, both nations are committed to strengthening their economic ties. US trade officials are scheduled to visit India for discussions on a proposed interim trade agreement, signalling ongoing efforts to resolve outstanding issues. India’s Commerce and Industry Minister, Piyush Goyal, has expressed optimism about finalizing a bilateral trade agreement, emphasizing the importance of a strategic and equitable partnership.

The US-India trade relationship is a tapestry woven with goods, services, investments, and strategic interests. While headline figures may suggest imbalances, a comprehensive analysis reveals a more nuanced reality. Legal developments, such as the US court’s ruling on tariffs, underscore the importance of adhering to established frameworks and mutual respect in trade negotiations. As both nations navigate the complexities of their economic partnership, a focus on transparency, equity, and long-term strategic alignment will be paramount in forging a resilient and mutually beneficial relationship.

(This is an opinion piece; views expressed solely belong to the author)

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About The Author

pseshkumar

Sesh Kumar Pulipaka is a retired officer of the Indian Audit and Accounts Service (IA&AS), having served under the Comptroller and Auditor General of India. He has authored two books on CAG– ‘CAG- ENSURING ACCOUNTABILITY AMIDST CONTROVERSIES- an inside view’ and ‘CAG- WHAT IT OUGHT TO BE AUDITING’ in addition to a third book ‘The Sacred Sound Path- walking with Nada Brahma and my Guru’.
His career was marked by significant contributions to public sector auditing, reflecting his expertise in financial oversight and governance. As a 1982-batch IA&AS officer, he held various roles within the CAG’s framework, focusing on ensuring accountability in government financial operations.

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