India, US trade deal is key to Trump’s economic agenda as well

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ET OnlineLast Updated: Mar 07, 2025, 04:32:00 PM IST

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India and the US are in talks for a potential trade deal, aiming to boost exports and production. However, companies may still source goods from more competitive markets like China or Southeast Asia. Despite reduced tariffs, brands like Harley-Davidson and Tesla currently avoid manufacturing in the US for exports to India.

Make trade cool again: A well-crafted, flexible US-India trade agreement can unlock lasting economic opportunities

A potential bilateral trade deal between India and the US is being viewed as a crucial element of US President Donald Trump's push to boost American production and exports, ToI reported. However, across-the-board duty reductions may not necessarily translate into higher US shipments to India, as companies are likely to source goods from more competitive markets like China or Southeast Asia.

Despite the tariff debates, American brands such as Harley-Davidson and Tesla do not currently manufacture vehicles in the US for export to India. Harley-Davidson, a brand often associated with US presidents, imports its motorcycles from Thailand, while Tesla—on the verge of entering the Indian market—plans to ship its electric vehicles from Germany after Indian authorities discouraged imports from China.

Locational advantages, lower freight costs, and economies of scale make it more profitable for companies to manufacture in other countries rather than the US. Many firms also take advantage of India's free trade agreements to ship goods at zero duty.

"For all the noise, Harley, which only makes the 440cc model in India in partnership with Hero Moto, is still relying on Thailand for its larger models," a foreign trade analyst told ToI. "The company uses its mega set-up in Thailand to ship models like Pan America, Nightster, Street Glide, and Fat Bob to India."

Even if India were to reduce import duties on US-made motorcycles to zero, Harley-Davidson would still benefit from sourcing them from Thailand due to lower freight costs and faster shipments, another analyst pointed out.

Commerce and Industry Minister Piyush Goyal is currently in Washington for trade discussions, with the prospect of securing duty advantages for both Indian and American exporters. The Indian government has already signalled its willingness to lower tariffs by cutting duties on imported motorcycles and bourbon whiskey.

While this move was widely seen as a response to Trump’s repeated criticism of India’s "high tariffs," it has yet to deliver significant gains for US manufacturers. Of the $2.6 million worth of bourbon whiskey imported into India, only $780,000 came directly from the US, with the majority sourced from bottling hubs in other countries.

A trade agreement could provide a more structured pathway for US businesses to expand in India while also ensuring greater market access for Indian exporters in the US.

(With ToI inputs)

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