More Than Just Harley Fat Boys In Budget Day Duty Cuts

The Budget Day coincided with US President Donald Trump's announcement of continuing the trade war, with the US imposing a 25% tariff on imports from Canada and Mexico, a 10% tariff on energy products from Canada, and an additional 10% tariff on China.

Despite his repeated criticism of India as the "biggest tariff abuser" and "tariff king," India's latest budget has introduced significant tariff reductions on multiple products, many of which benefit American exports.

Among the key tariff reductions, India lowered the duty on fish hydrolysate used in the manufacture of aquatic feed from 15% to 5%, a move that directly impacts US exports, which amounted to $35 million in 2023-2024.

Another notable tariff cut affects Ethernet Switches (Carrier-Grade) under the 'others' category, where duties have been reduced from 20% to 10%. The US exported $653.4 million worth of these products to India in 2023-2024, making this a significant trade benefit. Similarly, India has lowered the tariff on synthetic flavouring essences from 100% to 20%, a category in which US exports stood at $21 million in 2023-2024.

In the space sector, tariffs on ground installation for satellites, including spares and consumables, have been reduced to zero, benefiting American exporters who supplied $92 million worth of these products in 2022-2023. However, in 2023-24, imports dropped significantly to $70,000, suggesting a sharp decline in trade activity in this category. 

For the automobile sector, India has reduced tariffs on motorcycles based on engine capacity. For motorcycles with an engine capacity below 1,600cc, the tariff has been cut from 50% to 40%, while for motorcycles above 1,600cc, the tariff has been slashed from 50% to 30%. US motorcycle exports to India stood at $3 million in 2023-2024, and this tariff cut could help expand market access for American manufacturers.  Perhaps Harley-Davidson, often a reference point for Trump’s criticism of Indian tariffs, could move more motorcycles to India.

 Additionally, India has eliminated tariffs on specific waste and scrap items, reducing duties from 5% to zero. The US exported a total of $2.5 billion worth of waste and scrap of all types to India in 2023-2024.

While Trump has long criticized India's tariff structure, these latest reductions indicate a shift in policy that could boost US exports across multiple sectors. 

While Trump has often criticized India's tariff policies, these latest reductions signal a policy shift that could enhance US exports across various sectors. With key tariff cuts on technology, automobiles, industrial inputs, and waste imports, India appears to be taking steps toward facilitating trade even as the global trade environment remains tense. Whether these reductions will alter Washington’s view of India’s trade practices or become a point of contention in the US election cycle remains to be seen.

The tariffs will remain in place until the White House is satisfied that trading partners have addressed the issue of illicit fentanyl entering the US The tariffs also include a retaliation clause, which will increase penalties if trading partners respond with their own tariffs.

In addition to these measures, the US will suspend the "de minimis" loophole for Canada, which previously allowed shipments valued under $800 to enter duty-free. This move comes amid concerns that these shipments were not being properly inspected under the exemption.