Hours ahead of US President Donald Trump’s April 2 deadline to impose widespread reciprocal tariffs, a report by the office of the United States Trade Representative (USTR) has spotlighted numerous barriers to US exports, investment, and digital trade in India.
Released earlier today, the 2025 National Trade Estimate Report on Foreign Trade Barriers, provides a detailed assessment of restrictive measures in key sectors and sets the stage for possible reciprocal tariffs on India along with most nations across the globe.
India, according to the report, maintains some of the highest tariffs among major global economies. The average Most-Favoured-Nation (MFN) tariff rate stands at 17 per cent, with agricultural products averaging a steep 39 per cent, it states. In certain cases, such as alcoholic beverages and walnuts, duties can range from 100 per cent to 150 per cent. The USTR has said that India exercises significant flexibility to change tariffs unpredictably, creating a volatile environment for US exporters.
Beyond tariffs, the report identifies a range of non-tariff barriers, including restrictive import licensing, limitations on remanufactured goods and used medical devices, and arbitrary quantitative restrictions on products like pulses and boric acid. Complex customs procedures, inconsistent regional application of rules, and valuation disputes further compound trade difficulties.
The USTR also raises alarms over technical barriers to trade, pointing to India’s growing reliance on mandatory compliance with Bureau of Indian Standards regulations across diverse sectors such as chemicals, electronics, and telecommunications. These standards are often enforced with limited stakeholder consultation and short transition periods, placing disproportionate burdens on foreign firms.
In the agricultural space, sanitary and phytosanitary measures remain a flashpoint. The report criticizes India’s non-science-based rules for dairy, grain, and genetically modified-free certification. Market access remains blocked for genetically engineered products, distiller’s dried grains with solubles, and alfalfa hay. India’s strict pest controls and fumigation requirements, particularly methyl bromide treatment, are described as unnecessarily burdensome and inconsistently applied.
Intellectual property rights continue to be a sore point. India remains on the USTR Priority Watch List, with concerns including restrictive patentability (notably pharmaceuticals), weak trade secret protections, persistent online piracy, and judicial delays in trademark disputes.
In services and investment, the USTR cites foreign direct investment limits in sectors such as retail, banking, and legal services. Foreign firms often operate at a disadvantage compared to domestic players, facing additional restrictions and preference policies that favour state-owned enterprises.
On the digital front, India’s new Digital Personal Data Protection Act has introduced data localization mandates and government access provisions. U.S. concerns also centre around India’s IT Rules, which place personal criminal liability on platform employees and lack clarity. Frequent internet shutdowns and politically motivated content takedowns are also flagged as disruptive to digital trade.
Although India removed its 2 per cent digital services tax (DST) in 2024 under the OECD agreement, other legacy levies and data restrictions remain.
The report further highlights India’s agricultural subsidies, especially through the Minimum Support Price program, which incentivizes overproduction and distorts global markets. India has exceeded WTO subsidy limits for rice and is seeking a permanent exemption under food security provisions.
The USTR has also pointed to a lack of centralized government procurement policies, transparency in rulemaking, and WTO notifications. With reciprocal tariffs under discussion, these findings may soon have real-world implications for U.S.-India trade relations.
