What U.S.-India Trade Negotiations Mean for Your Business

As Yogi Berra quipped, “It’s déjà vu all over again.” Trade deals have already been struck with Japan, the EU, South Korea, and other partners. Now the same dance begins with India—but with some new twists. On Monday, President Trump announced plans to substantially increase tariffs on India, raising them from an already‑high 25% in response to India’s purchase of Russian oil. With India emerging as a leading manufacturer, the stakes are quite high. A failure to clinch a deal could affect U.S. consumers and businesses.

Here is a breakdown of what’s at stake:

1. Electronics Manufacturing. India has emerged as a major electronics manufacturer. In the second quarter of 2025, India overtook China as the top manufacturer of US-bound smartphones, with its share of shipments growing from 13% to 44% in a single year. Apple is reportedly speeding up its plans to move its manufacturing of iPhones from China to India. Higher tariffs may not affect the overall Indian economy—Bank of Baroda estimates they will take 0.2% off the 6.5% 2026 growth target. But the hit to electronics manufacturing could be much more substantial.
2. Pharmaceuticals. Pharmaceuticals are currently exempt from the reciprocal “Liberation Day” tariffs. Trump has indicated, however, that he plans to tariff pharmaceuticals, initially with a small tariff and possibly with rates of up to 250%. Such tariffs could be significant for India, as it is the world’s largest producer of generic drugs. In 2024, India exported $8.7 billion (Rs 76,113 crore) of pharma products to the U.S.—its largest pharma export market—around 11% of India’s U.S.-bound exports. Indian pharma exporters and U.S. importers of Indian drugs will need to carefully monitor developments.
3. Automotive. India has emerged as a major auto manufacturer. In FY 2024, India’s auto exports increased 19% to 5.3 million units. While exports to the U.S. were virtually nil, the growth of India’s auto market—along with rising incomes—has made it an increasingly attractive destination for foreign automakers. Vietnamese car maker VinFast announced plans to open a $500 million plant in Tamil Nadu. Tesla recently opened its first showroom in India, but isn’t yet looking to manufacture domestically. India’s big competitors—Indonesia, Malaysia and Vietnam—face American tariffs of 19% to 20%. Higher tariff rates for India could incentivize manufacturers to look elsewhere.
4. Investment. Investment pledges could be instrumental in reaching a final trade agreement. In FY 2024–25, U.S. companies invested roughly $8.9 billion in India, accounting for about 11% of India’s total FDI inflows in $81 billion. By comparison, India’s cumulative stock of FDI in the United States stood at $17 billion at the end of 2023, making it a small but growing source of U.S. inward investment. The U.S. administration would likely welcome a further increase in Indian-origin FDI. Under the Mission 500 Trade Framework, both governments have signaled intent to substantially increase bilateral trade and investment, with a goal of reaching $500 billion in annual trade by 2030.
5. Defense. Defense ties could be another crucial facet of cementing a trade deal. Since 2008, India has become a major customer of US defense contractors. India is the world’s second-largest importer of defense equipment after Saudi Arabia—$48 billion in imports from 2008-2024—but the US accounts for only 10% of imports. President Trump would undoubtedly like to increase this percentage. A major uptick in defense purchases thus could become a bargaining chip to ease tariff negotiations.

While you can’t control the trade talks, there are a few things you can do to protect your business:

1. Shipping & Incoterms. Companies should review their existing agreements to clarify who is responsible for import duties. US-based buyers will likely want DDP terms; Indian exporters will likely want importers to absorb the cost of tariff duties.
2. Force Majeure Clauses. Companies should tighten their force majeure clauses to account for changes in the tariff situation. While enforceability varies by jurisdiction, companies should ensure that contingencies like government action, changes in law, and impossibility of performance are expressly included, so that sudden tariff shifts don’t leave them exposed.
3. Sanctions/Export Control. The latest round of escalation emerged from concern about sale of Russian energy. Companies must ensure full compliance with US sanctions, including any secondary sanctions.
4. Diversification. Companies should also revisit supply chain diversification, particularly if India remains a focal point in trade tensions.

“What are we, if not characters, from one story or another…” as Sandip Khade reminds us. Trade conflicts are one such story—but businesses can choose to play their part strategically, not passively. Companies that understand the stakes and take proactive steps to mitigate risk shall be not mere characters in the tale, but authors of its next chapter.

 Disclaimer: This blog is for informational purposes only and does not constitute legal advice. Reading or interacting with this content does not create an attorney–client relationship. You should consult a qualified attorney for advice regarding your specific situation. Mehaffy, PLLC disclaims all liability for actions taken or not taken based on this blog.