India and the US are charting an ambitious course to more than double their bilateral trade to $500 billion by 2030, a move that could reshape economic ties between the world’s largest democracy and its biggest economy.
Indian Prime Minister Narendra Modi and US President Donald Trump outlined this vision at a joint press conference in Washington, emphasising a shift toward strategic partnerships in defence, technology, and energy.
The announcement comes as both nations recalibrate their trade policies amid global economic realignments.
The US is seeking to counterbalance China’s economic influence, while India is reducing its reliance on traditional defence suppliers like Russia.
The partnership extends beyond trade to joint initiatives in artificial intelligence (AI), semiconductor production, and critical minerals—sectors that are crucial for supply chain resilience.
Tariffs and trade imbalances
While the target of $500 billion in trade signals deeper engagement, both sides face hurdles in resolving tariff disputes.India’s average tariff rate on nations with most-favoured-nation (MFN) status stands at 17%, compared to 3.3% in the US.
This disparity has long been a sticking point in trade negotiations.
Trump has reinforced his stance on “reciprocal tariffs,” advocating for equivalent levies on imports from India.
The US had previously withdrawn India’s preferential trade status under the Generalized System of Preferences (GSP), citing unfair market access.
Modi, however, pointed to recent tariff reductions on select imports as a step toward fairer trade, expressing optimism about concluding a new trade agreement soon.
Despite differences, the US remains India’s second-largest trading partner, with total goods trade estimated at $129 billion in 2024.
India’s trade surplus with the US stood at $45.7 billion last year, reflecting its strong export-driven growth.
Defence cooperation accelerates with F-35 deal
A major shift in US-India relations is taking place in defence, as India diversifies its military procurement away from Russia.Trump announced an increase in military sales to India, including plans to eventually provide F-35 fighter jets.
This marks a significant move in India’s defence strategy, as the country remains one of the world’s largest importers of military equipment.
India’s deepening defence ties with the US align with Washington’s broader strategy of strengthening alliances in the Indo-Pacific to counterbalance China.
The US is already a key supplier of advanced defence systems to India, and the inclusion of F-35s would further solidify this relationship.
Strategic investments in AI and semiconductors
Beyond trade and defence, India and the US are strengthening cooperation in emerging technologies.Both countries have committed to bolstering AI development and semiconductor manufacturing, aiming to create resilient supply chains.
These efforts are particularly significant as global chip shortages highlight the risks of overdependence on a few production hubs.
With AI and semiconductor industries driving the next wave of economic growth, India is positioning itself as a critical player in the global tech supply chain.
The US, in turn, is looking to diversify its semiconductor manufacturing base and reduce reliance on China.
These collaborations could pave the way for joint research and development initiatives, attracting significant investment from American tech firms into India’s digital economy.