Reasons Why India Should Not Be Considered in the Same Light as China in US Trade Policy

Much of the attention in Washington has been on the evolution of Donald Trump's trade policy as he begins his second term as President of the United States. It is becoming increasingly important to analyze the unique dynamics between the United States and India, despite the fact that the rhetoric surrounding China's unjust trade practices has been strident and clear. As experts have noted, India should not be subjected to the same punitive tariffs as China, primarily due to the essentially different character of trade relations between the United States and India. Although both nations have a common adversary in China, the economic ties and strategic partnership with India provide significantly more complex advantages than the adversarial relationship with Beijing.

The sheer scale and structure of India's commerce with the United States are among the most obvious reasons why it should be exempt from tariff hikes. India's surplus is negligible in comparison to China, which contributes substantially to the United States' trade deficit. In stark contrast to China, which accounts for a quarter of the US's over $1 trillion trade deficit, India contributes only approximately 4%. This is not merely a numerical value; it is a testament to the disproportionate economic leverage that China possesses over the United States, a leverage that India has never pursued. India has consistently demonstrated restraint, and its relatively modest surplus does not constitute a trade imbalance of the magnitude that would necessitate the same punitive measures as China.

Since India's economic liberalization in the early 1990s, bilateral commerce between the United States and India has been consistently increasing. This trend has been further exacerbated over the past three decades. The volume of trade has increased by more than twentyfold, with a total of over $120 billion in products. This success tale is not the outcome of unilateral advantages, but rather of mutually beneficial attributes. India has emerged as a significant player in the global services sector, particularly in IT and business outsourcing. However, the United States has consistently recognized India as a valuable partner in sectors where both economies meet their respective requirements, including defense, critical technology, and consumer products. Consequently, India is not only an economic ally but also a critical component of the United States' overarching geopolitical strategy, particularly in the context of China's increasing influence.

In comparison to its Chinese counterpart, India has demonstrated remarkable progress in the realm of trade practices. Although certain sectors, such as agriculture and automobiles, are subject to higher tariffs in India, the country has announced that it is committed to a long-term reduction in tariffs. This commitment is not novel; it has been a consistent process since the 1990s, and the current government has expressed its intention to continue liberalizing trade in a manner that benefits both nations. Conversely, China's economy is supported by state-led capitalism, which includes industrial subsidies that artificially increase exports. On the other hand, India has refrained from implementing such practices. The expenditure of industrial subsidies in China is nearly 1.75% of its GDP, which is significantly higher than India's modest expenditure of less than 0.25% of GDP. The outcome? In contrast to China, India's exports do not inundate the US market with underpriced, state-subsidized products.

Another critical distinction is that India has not exploited its economic position to strategically undermine US interests, as China has. India's foreign direct investment (FDI) laws are meticulously crafted to prevent Chinese firms from exploiting India as a conduit to the US market. China accounts for a mere 0.37% of the total FDI inflows into India. This distinguishes India from China, where the US economy has been consistently afflicted by intellectual property thievery and the substantial influx of counterfeit products. International organizations' data consistently demonstrate that China continues to be the primary source of counterfeit products entering the United States market, a situation that India has successfully circumvented.

Additionally, the political environment in India is significantly more favorable to American enterprises than that of China. American companies in India have not encountered the same level of hostility as Chinese firms, despite the increasing number of sanctions and restrictions imposed by the US government. In reality, US technology titans such as Uber, Google, and Meta have prospered in India not as a result of local regulations, but rather as a result of them. This demonstrates the relatively open and equitable market that India provides, which is in striking contrast to the obstacles that American firms encounter in China.

The shared grievances that both nations have with Beijing's trade practices are underscored by India's own trade imbalance with China, which reached an astounding $85 billion in the fiscal year 2024. India is not a passive participant in this game; it is actively pursuing the expansion of its industrial base and has the potential to become an even more valuable partner to the United States, particularly as tensions with China escalate.

Trade is not the sole determinant of the relationship between the United States and India. At a more profound level, it is influenced by human capital. The Indian diaspora in the United States has played a crucial role in the nation's expansion, contributing a disproportionate amount to the US economy in terms of entrepreneurship and taxes. Indian-Americans have played a significant role in the development of various industries, including Silicon Valley and Wall Street, by fostering innovation and establishing employment opportunities. Despite the fact that their influence has been felt in every sector, they continue to be one of the most disregarded forces in the US-India relationship.

In summary, India is not comparable to China. India and the United States have robust, mutually beneficial economic, geopolitical, and cultural connections that are distinct from the adversarial relationship that the United States maintains with China. The United States should acknowledge the substantial potential of its relationship with India and refrain from associating it with China's trade practices, which continue to be a significant concern. In the context of increasing global uncertainties, a strategic, deliberate, and equitable approach to trade between the United States and India will not only bolster both economies but also advance shared objectives.