link to page 1 
Updated April 3, 2019
U.S.-India Trade Relations
The United States and India view one another as important
mostly failed effort to address tax evasion and corruption,
strategic partners to advance common interests regionally
and the roll-out of new national value-added goods and
and globally. Bilateral trade in goods and services is 2% of
service tax in 2017 to streamline the tax regime.
U.S. world trade, and has grown in recent years (Figure 1).
Selected Issues
The trade relationship is more consequential for India; in
2017, the United States was its second largest export market
Tariffs. Bilateral tensions have increased over each side’s
(16% share) after the European Union (EU, 17%), and third
tariff policies. These include the U.S. 25% steel and 10%
largest import supplier (6%) after China (17%) and the EU
aluminum tariffs under the national-security based “Section
(10%). U.S.-India foreign direct investment (FDI) is small,
232” law. India did not receive an initial exception like
but growing. Defense sales also are significant in bilateral
some trading partners, nor negotiate an alternative quota
trade. Civilian nuclear commerce, stalled for years over
arrangement. India supplied less than 3% of U.S. steel and
differences on liability protections, has produced major
aluminum in 2017. India has delayed further imposing its
potential U.S. supply contracts. The Trump Administration,
planned retaliatory tariffs until May 2, 2019, in hopes of a
which views bilateral trade balances as an indicator of the
bilateral resolution; these tariffs of 10% to 50% would
health of a trading relationship, takes issue with the U.S.
target $241 million in U.S. goods such as nuts, apples, steel,
trade deficit with India, and has criticized India for a range
and motorcycles. India also is challenging the U.S. tariff
of “unfair” trading practices. Countering this view, India
increases in the World Trade Organization (WTO).
notes that the U.S. bilateral trade deficit dropped in 2018.
President Trump has called India “a very high-tariff nation”
The causes and consequences of trade deficits are debated.
and criticized tariff imbalances, such as on motorcycles
Figure 1. U.S. Trade and Investment with India
(which previously faced 100%, now 50%, Indian tariffs,
compared to U.S. tariffs of 0% to 2.4%). India has
relatively high average tariff rates, especially in agriculture.
It can raise its applied rates to bound rates without violating
its commitments under the WTO, causing uncertainty for
U.S. exporters. India’s tariff hikes include raising tariffs on
cell phones from 0% originally to 15% to 20%, prompting
the United States and others to question India’s compliance
with the WTO Information Technology Agreement (ITA).
India also raised duties on certain “non-essential” consumer
and other goods to stem its current account deficit. The EU
initiated WTO dispute settlement consultations, claiming
that certain tariff hikes by India exceed bound rates. U.S.
concerns over Indian market access include price controls
on medical devices, and investment and other non-tariff
barriers.
U.S. Generalized System of Preferences (GSP). On
March 4, 2019, President Trump notified Congress of his
intent to terminate India’s GSP eligibility, which gives
duty-free tariff treatment to certain U.S. imports from
Source: CRS analysis, Bureau of Economic Analysis (BEA) data.
eligible developing countries to support their economic
India’s Economy
development. The notice followed a U.S. review of India’s
market access practices, as well as petitions by the U.S.
India is one of the world’s fastest-growing economies
medical device and dairy industry. By law, the President
(more than 7% growth projected for 2019), third largest
must notify Congress at least 60 days prior to a GSP change
economy on a purchasing power parity basis, and second
taking effect. India is GSP’s top beneficiary. In 2018, GSP
largest country by population, with an expanding middle
represented 11% ($6.3 billion) of U.S. merchandise imports
class. Economic challenges include poverty, difficulty
from India, such as chemicals, auto parts, and tableware.
absorbing millions of young new workers joining the labor
GSP removal would reinstate U.S. tariffs, which range from
force, and infrastructure gaps. India imports about 80% of
1% to 7% on the top 15 GSP bilateral imports. India sought
its oil needs. Rising energy prices and other global factors
continuation of its eligibility, but since the President’s
have led to depreciation of the Indian rupee against the U.S.
announcement, has downplayed the impact of the proposed
dollar, leading to inflation concerns. Domestic economic
change. India plans to treat retaliatory tariffs separately.
measures include “demonetization” in 2016, which
Services. The United States and India are competitive in
removed 86% of currency by value from circulation in a
certain services industries. Barriers to U.S. firms’ market
https://crsreports.congress.gov
U.S.-India Trade Relations
access include India’s limits on foreign ownership and local
Countering America’s Adversaries Through Sanctions Act
presence requirements. A key issue for India is U.S.
(P.L. 115-44).
temporary visa policies, which affect Indian nationals
Current Negotiations and Agreements
working in the United States. India is challenging U.S. fees
for worker visas in the WTO, and monitoring potential U.S.
Bilateral Engagement. The United States and India have
action to revise the H-1B (specialized worker) visa
held “intensive” negotiations to address the U.S. steel and
program. India also continues to seek a “totalization
aluminum tariffs, India’s GSP status, and other trade issues.
agreement” to coordinate social security protection for
Dialogues include the government-to-government Strategic
workers who split their careers between the two countries.
and Commercial Dialogue (S&CD) and Trade Policy
Agriculture. Sanitary and phytosanitary (SPS) barriers in
Forum, and the private sector-based CEO Forum.
India limit U.S. agricultural exports. The United States
“… after intensive [bilateral] engagement…, I have
questions the scientific and risk-based justifications of such
determined that India has not assured the United States
barriers. An ongoing issue is India’s purported compliance
that it wil provide equitable and reasonable access to the
with a WTO decision against its ban on U.S. poultry
markets of India….”—President Trump’s GSP notification
imports and live swine due to avian influenza concerns; the
letter to Congress, March 4, 2019
WTO held that India’s measures violated WTO SPS rules.
“… India was able to offer a very meaningful way forward
Each side also sees the other’s agricultural support
on almost al the US requests. In a few instances, specific
programs as market-distorting; India’s view of its programs
US requests were not found reasonable and doable … in
from a broad food security lens complicates matters.
light of public welfare concerns reflective of India’s
Intellectual Property (IP). The two sides differ on how to
developing country status….”—Indian Ministry of
balance IP protection to incentivize innovation and support
Commerce statement, March 5, 2019
other policy goals, such as access to medicines. India’s IP
regime remains a top U.S. concern, and India remains on
The United States and India do not have a bilateral free
the “Special 301” Priority Watch List for 2018, based on
trade agreement (FTA). In October 2018, President Trump
such concerns as its treatment of patents, infringement
stated that India expressed interest in negotiating an FTA.
rates, and protection of trade secrets.
Some India watchers advocate for an FTA, while others
question India’s willingness to open its markets. Past
“Forced” Localization. The United States continues to
negotiations on a bilateral investment treaty are stalled.
press India on its “forced” localization practices. Initiatives
Regional Integration. India is party to negotiations on the
to grow India’s manufacturing base and support jobs
include requirements for in-country data storage, domestic
Regional Comprehensive Economic Partnership (RCEP)
content (such as laws protecting India’s solar sector), and
with China and 15 other Asia-Pacific nations. Seven RCEP
domestic testing in some sectors. Adding to U.S. concerns
members (but not India) are among the 11 remaining parties
are India’s new data localization requirements for electronic
of the proposed Trans-Pacific Partnership (TPP); they
payment service suppliers (e.g., MasterCard, Visa).
concluded a new trade agreement after President Trump
ceased U.S. participation in the TPP. Among other issues,
Investment. India aims to attract foreign investment and
India has long sought to join the Asia-Pacific Economic
has made FDI reforms, such as raising foreign equity caps
Cooperation (APEC) group of the United States, China, and
for insurance and defense, and other strides to improve its
19 other economies. The United States stated previously
business environment (World Bank, Doing Business
that it welcomes India in APEC. Some question if India is
Indicators). U.S. concerns about investment barriers remain
willing to make sufficient economic reforms to join APEC.
nevertheless, heightened by new Indian restrictions on how
e-commerce platforms such as Amazon and Walmart-
WTO. Differing U.S. and Indian views have constrained
owned Flipkart conduct business. From the U.S. view,
multilateral negotiations to liberalize trade in the WTO. The
India’s weak regulatory transparency and other issues, such
Trade Facilitation Agreement (TFA) to remove customs
as India’s IPR and localization policies (see above), add to
barriers, the first multilateral agreement concluded in over
concerns about FDI barriers. Two-way U.S.-Indian FDI is
20 years, entered into force in 2017 after India reversed its
linked to U.S. jobs and exports in a range of sectors, yet
prior blocking of the TFA. This change followed a U.S.-
U.S. FDI in India prompts some offshoring concerns.
Indian understanding not to challenge specific food security
programs until the WTO reaches a solution on public
Defense Trade. The two nations have signed defense
stockholding for food security, a top Indian priority. The
contracts worth more than $15 billion since 2008, up from
WTO’s future direction is unclear amid institutional issues.
$500 million in all previous years combined. Major
Congressional Interest
anticipated sales include 24 MH-60 Seahawk multi-role
naval helicopters and a potential commercial sale of AH-64
Questions on U.S.-India trade relations may include
Apache attack helicopters. India is eager for more
What are prospects for a bilateral resolution to trade
technology-sharing and co-production; some reports
frictions? What role would GSP eligibility termination
indicate U.S. and Indian interest in producing F-16 combat
play? Are multilateral or regional solutions possible?
aircraft there. The United States, meanwhile, urges more
Given the Trump Administration’s focus on greater
reforms in India’s defense offsets policy and higher FDI
reciprocity in U.S. trade relations, what are ways to
caps in its defense sector. India’s pursuit of a multibillion-
strengthen U.S.-Indian trade and investment ties? Is
dollar deal to purchase the Russian-made S-400 air defense
there potential for broader trade agreement negotiations?
system may trigger U.S. sanctions on India under the
https://crsreports.congress.gov
U.S.-India Trade Relations
K. Alan Kronstadt, Specialist in South Asian Affairs
Shayerah Ilias Akhtar, Specialist in International Trade
IF10384
and Finance
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF10384 · VERSION 10 · UPDATED