Import Curbs, Procurement Rules: US Flags Concerns Over India’s Trade Policies Ahead of April 2

A couple of days before the announcement of the reciprocal tariff by the Trump administration, the USA highlighted several trade and regulatory challenges that American exporters face in India, including issues related to tariffs, non-tariff barriers, intellectual property, services, digital trade, and transparency. A report released by the United States Trade Representative (USTR) on March 31 stressed on the fact that how there is a huge tariff disparity between India and the US that affects U.S. exports, investments, and digital trade. 

“India’s average Most-Favored-Nation (MFN) applied tariff rate was 17.0% in 2023 (latest data available), which was the highest of any major world economy, with an average applied tariff rate of 13.5% for non-agricultural goods and 39.0% for agricultural goods,” quoted the report.  

The Pain Points  

One of the major concerns highlighted in the report includes how India has leveraged the flexibility of changing the tariff structure and has increased tariffs without any notice or public consultation process on more than 70 product categories. These include sectors such as agriculture, information and communication technology, medical devices, paper products, chemicals, and automotive parts sectors. 

“Given the large disparity between WTO bound and applied rates, India has considerable flexibility to change tariff rates for both agricultural and non-agricultural products at any time, creating tremendous uncertainty for U.S. workers, farmers, ranchers, and exporters,” stated the report.  

The report highlights that India also has several non-tariff barriers like import bans and licensing rules that create hindrances for American exporters. US tagged the import restrictions of India as ‘opaque and unpredictable’ which has affected the ability of U.S. exporters to access the market. 

For instance, in February 2022, India issued a notification to restrict the import of mung beans until March 31, 2023, but imports of most pulses are now allowed without any quantitative restrictions. 

The custom duty regulations have been flagged as another bone of contention. As mentioned in the report, India’s customs officials often challenge declared import values, increasing costs for US exporters. Companies report extensive inspections, seizures, and duplicative documentation requirements, causing delays. 

India’s intellectual property regime remains a flashpoint, with Washington citing bureaucratic hurdles and restrictive patent laws. Additionally, India’s digital trade policies are particularly contentious for the USA. The Reserve Bank of India mandates data localization, requiring foreign payment service providers to store Indian data domestically. While the U.S. sees this as a burden on global cloud and payment services. Internet shutdowns in India have also been flagged as disruptive to U.S. services and the digital economy. 

Unfavourable Policies for US Exporters

The US accused the Indian government of opting for protectionist measures particularly safeguarding the medium and small industries, thereby making it more challenging for the US exporters. Alongside, the involvement of the government in various sectors like the dominance of public service units in the banking and finance sectors has been flagged as a major concern.  

“India lacks an overarching government procurement policy and, as a result, its government procurement practices and procedures vary among different ministries within the central government. India provides procurement preferences to Indian micro-, small, and medium-sized enterprises and to state-owned enterprises,” added the report.  

The USA criticised several ministries and their departments like MEITY, Commerce Ministry for adopting measures to favour their domestic manufacturers, thereby making the business environment less conducive for American businesses.  

For instance, the US criticised MEITY for issuing the notification that entities must procure cellular mobile phones only from domestic suppliers meeting the domestic production requirement of 50 percent, irrespective of purchase value. 

The Road Ahead  

US President Donald Trump had earlier cautioned that the reciprocal tariffs would apply to “all countries” without exception. On Monday, White House Press Secretary Karoline Leavitt particularly targeted tariff rates in countries like Japan, India, and Canada. Thus, there is a chance that these countries are more likely to feel the heat of the reciprocal tariff.  

Ajay Srivastava, former trade ministry official and founder of the think tank Global Trade Research Initiative (GTRI), said, “While the U.S. continues to pressure India to amend its trade policies to serve American commercial interests, India must firmly assess each demand through the lens of its own national priorities, development goals, and cultural values.” 

According to GTRI's founder, many of the proposed changes—in areas like agriculture, digital governance, and public health—pose serious risks to India’s ability to protect its small farmers, maintain food safety, uphold deeply rooted social norms, and secure its digital future. Also, it is unlikely that India will trade away its policy space, economic security, or public welfare to please foreign interests.