Increased Tariff Rates Against India: Is the US Afraid of India’s Economic Progress?


Increased Tariff Rates Against India: Is the US Afraid of India’s Economic Progress?

Introduction

In recent years, the global economic landscape has been shifting rapidly. India, once seen primarily as a developing economy, is now emerging as one of the fastest-growing major economies in the world. With rapid industrial growth, a booming services sector, technological innovation, and strategic trade policies, India has begun to assert itself as a major economic power.

Amid this rise, trade tensions between India and the United States have also intensified. One of the most visible signs of this friction has been increased tariff rates imposed by the US on certain Indian goods. While official explanations from Washington often focus on “trade imbalances” or “market access issues,” there is a growing belief that a deeper motivation exists: concern over India’s accelerating economic ascent and its potential to challenge US dominance in certain sectors.

India’s Economic Surge and Its Strategic Impact

Before exploring the tariff issue, it’s important to understand why India’s economic trajectory has drawn global attention:

  • High Growth Rate – India has consistently recorded GDP growth rates higher than most major economies.
  • Manufacturing Push – Initiatives like “Make in India” aim to position the country as a global manufacturing hub.
  • Tech Leadership – India is a powerhouse in IT services, software development, AI research, and digital infrastructure.
  • Global Trade Ambitions – India is expanding trade relations with Asia, Europe, Africa, and Latin America, reducing over-reliance on any single market.

These developments mean that India is not only growing domestically but is also beginning to compete with established economic giants — including the US — in areas like pharmaceuticals, engineering goods, renewable energy equipment, and IT services.

The US Tariff Increases: What Changed?

In the last few years, the US has raised tariffs on a range of Indian exports, including steel, aluminum, certain agricultural products, and textiles. Additionally, India’s Generalized System of Preferences (GSP) benefits — which allowed duty-free access to the US market for many Indian goods — were revoked in 2019.

The stated reasons from the US Trade Representative’s office often include:

  • Alleged Unfair Trade Practices – Claims that India’s tariff and non-tariff barriers restrict US companies.
  • Intellectual Property Concerns – Pressure on India to strengthen patent laws in favor of US pharmaceutical and tech companies.
  • Market Access Demands – Complaints about restrictions on US dairy, agricultural goods, and e-commerce platforms.

However, these stated reasons only tell part of the story.

The Deeper Geopolitical Concern: Fear of a Rising Competitor

The belief that the US is “scared” of India’s progress is not unfounded when viewed through a geopolitical and economic lens. Several factors contribute to this perception:

1. Shifting Global Economic Power

The global economic order has long been dominated by the US and, in recent decades, challenged by China. India’s rise adds another potential rival to this hierarchy. In sectors like pharmaceuticals, space technology, and information technology, India is already cost-competitive and innovation-driven, threatening US market shares.

2. Trade Surplus in India’s Favor

For certain categories, India enjoys a trade surplus with the US. This surplus, while small compared to China’s, has been growing, prompting protectionist responses from Washington.

3. Strategic Independence

India’s refusal to align blindly with US policies — whether in buying discounted Russian oil, developing its own 5G networks, or expanding defense ties with multiple countries — signals that it is not a dependent partner but an independent power. Such autonomy often makes established powers uncomfortable.

4. Technology and Services Dominance

The Indian IT and services industry has expanded aggressively in the US market, with Indian firms securing major contracts in banking, healthcare, and government projects. This success has occasionally triggered protectionist impulses among American policymakers seeking to safeguard domestic jobs.

Historical Pattern of Economic Protectionism

The imposition of higher tariffs on rising economies is not new. The US has historically used trade barriers to slow the momentum of potential competitors. Similar measures were seen:

  • Against Japan in the 1980s when it threatened US dominance in automobiles and electronics.
  • Against China in the 2000s and 2010s during its rapid industrial growth.

Now, India appears to be facing a similar trajectory — a combination of economic competition and geopolitical calculation.

India’s Response to US Tariffs

India has not remained passive in the face of US tariff hikes. Its responses have included:

  • Retaliatory Tariffs – Imposing higher duties on US exports like almonds, apples, and walnuts.
  • Diversifying Export Markets – Increasing trade with ASEAN, Africa, and the EU to reduce dependency on US demand.
  • Strengthening Domestic Industries – Boosting local manufacturing capacity to reduce vulnerability to trade restrictions.

This strategy reflects India’s long-term goal of self-reliance (Atmanirbhar Bharat) while maintaining an outward-looking trade policy.

Economic Competition vs. Partnership

Despite tariff tensions, India and the US maintain a complex relationship. They are strategic partners in defense, technology, and democratic values. Yet, economic rivalry is undeniable. The US is simultaneously:

  • Engaging India as a counterbalance to China in the Indo-Pacific.
  • Restricting Indian access to its markets in sectors where India could emerge as a formidable competitor.

This duality shows that fear of economic displacement often coexists with strategic cooperation.

The Road Ahead

Whether the tariff issue worsens or resolves will depend on:

  • Trade Negotiations – Both nations have engaged in talks to reduce friction, but results remain mixed.
  • Global Economic Shifts – A slowing US economy or a stronger India could reshape bargaining power.
  • Geopolitical Pressures – Strategic needs, such as containing China, might push the US to soften its economic stance toward India.

Conclusion

The increased tariffs on Indian goods by the United States cannot be seen only as a matter of “market access disputes.” They reflect a deeper unease about India’s rapid economic rise and its potential to challenge established powers in the coming decades.

While official statements will continue to cite technical trade concerns, the underlying reality is that India’s progress represents both an opportunity and a perceived threat to the US. The challenge for both nations will be to manage this evolving relationship in a way that allows cooperation without stifling healthy competition.

India’s economic journey is far from over — and if history is any guide, attempts to slow it down through protectionist measures are unlikely to succeed in the long run.


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