From Obama To Trump: How US-India Trade Ties Went From Growth To Tensions

On August 1, 2025, the United States President Donald Trump announced a 25% tariff on Indian imports, a move that was followed by an additional 25% tariff, escalating trade tensions between the two countries. The US cited India's continued purchase of Russian oil, stating it was "fuelling the Russian war machine." 

Ministry of External Affairs responded, calling the move "unfair, unjustified, and unreasonable," but also confirmed that trade negotiations with the US would continue.

President Trump, defended the tariffs, stating, "Tariffs are making the United States great and rich again. One year ago, America was a dead country. Now it is the hottest country anywhere in the world."

Trump's policy marks a significant shift from the approach that characterised US-India trade relations under Presidents Barack Obama and Joe Biden. To understand how the relationship reached this point, let's look at the recent history of US-India trade ties and India's economic role in the United States.

The Obama Era (2009-2017)

The United States and India shared a strong and growing commercial and economic relationship, driven by entrepreneurs and businesses in both countries.

President Obama and Prime Minister Manmohan Singh in 2013 had pledged to make the next decade equally transformative, and challenged their governments to reach the full potential of partnership, particularly in the areas of security cooperation, bilateral trade and investment. The leaders noted that two-way trade increased fivefold since 2001 to nearly $100 billion.

In January 2015, President Obama and Prime Minister Narendra Modi had also decided to elevate the bilateral commercial and economic partnership.

Key Developments:
Bilateral trade in goods and services grew significantly, from $19 billion in 2000 to over $100 billion by 2014. Multiple bilateral forums also helped in shaping economic relations:

• US-India CEO Forum: Brought together top business leaders to advise policymakers on expanding trade and investment. Both the leaders welcomed the expansion of the partnership in oversight of financial institutions, including between Reserve Bank of India and the US Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System and the Office of the Comptroller of Currency.
• Commercial Dialogue: US and India held their annual Commercial Dialogue in 2015 on how to enhance their respective, government-led investment promotion efforts.
• Trade Policy Forum (TPF): This enabled the United States and India to engage on a wide range of policy issues impacting bilateral trade and investment.
• Bilateral Investment Treaty (BIT): The United States and India held discussions toward a high-standard bilateral investment treaty (BIT) in March 2015. A high-standard BIT deepened the bilateral economic relationship and supported economic growth and job creation in both countries. 
• Ease of Doing Business: The US and India launched a joint work stream to focus on issues to increase bilateral trade, contract enforcement, insolvency and bankruptcy law, and cross border trade, including non-tariff barriers.
• Innovation Forum: A private-sector Innovation Forum was launched to increase two-way investment and support small and medium-sized enterprises (SMEs).
• Investment Promotion: US agencies like SelectUSA and organisations such as The Indus Entrepreneurs (TiE) supported Indian entrepreneurs expanding into the US market.

US Economy During Obama's Tenure

President Obama took office in the middle of the worst economic crisis since the Great Depression, at a time the economy was losing over 700,000 jobs a month. In response, President Obama signed the American Recovery and Reinvestment Act into law to help in creating jobs. At the time,

• 11.6 million jobs were added across his presidency.
• Unemployment dropped from 10% to 4.7 per cent.
• GDP growth averaged 2.6 per cent during Obama's final 11 quarters.
• Median household income increased by $4,800 during his last two years.

India's Role In US Economy

• US exports to India: $38 billion, supporting 181,000 American jobs.
• Indian foreign direct investment (FDI) in the US: $7.8 billion.
• Over 132,000 Indian students studied in the US, contributing $3.6 billion to the American economy in the 2014-15 academic year.

The Biden Era (2021-2024)

During President Joe Biden's term, the US-India relationship went through strategic partnerships, institutional dialogue, and the resolution of trade disputes.

Key Developments

• Initiative on Critical and Emerging Technology (iCET): Launched in May 2022, iCET was a landmark agreement to deepen strategic cooperation in Artificial Intelligence, Quantum Computing, Semiconductors, and Advanced Telecommunications. It also supported defence industrial collaboration, making India a partner in future-ready manufacturing and innovation.
• Trade Policy Forum (TPF): Originally established in 2005, the TPF was revitalised under Biden and became the central ministerial-level mechanism for resolving trade disputes and identifying opportunities for growth. By January 2024, a joint statement from the Press Information Bureau (PIB) noted that US-India bilateral trade had likely surpassed $200 billion in 2023, a record high.
• Resolution of WTO Disputes: One of the most significant breakthroughs under Biden's administration was the resolution of long-standing disputes at the World Trade Organization in 2023:

1. United States - Countervailing Measures on Certain Hot-Rolled Carbon Steel Flat Products from India
2. India - Measures Relating to Solar Cells and Solar Modules
3. United States - Measures Relating to the Renewable Energy Sector
4. India - Export Related Measures
5. United States - Steel and Aluminium Products 
6. India - Additional Duties on Certain US Products

Outcomes

1. The US granted market access to Indian steel and aluminum.
2. The US Commerce Department cleared 70 per cent of steel and 80 per cent of aluminum product applications from India
3. India lifted retaliatory tariffs
4. A 35 per cent rise in India's steel and aluminum exports to the US.

• Generalized System of Preferences (GSP): Despite Indian efforts, the GSP, which had been terminated by Trump in 2019, was not reinstated during the Biden presidency. The USTR stated that India failed to ensure equitable and reasonable market access for US goods in several sectors.
• Indo-Pacific Economic Framework for Prosperity (IPEF): India joined the US-led IPEF in 2022, participating in three out of four pillars, Supply Chains, Clean Economy, and Fair Economy.

However, India opted out of the trade pillar, citing concerns about whether the framework adequately addressed the needs of developing nations.

US Economic Performance Under Biden

Despite Trump's portrayal of Biden's economy as a disaster, the numbers from the Biden era depict something else.

• Real GDP growth: 12.6 per cent from Jan 2021 to Jan 2025
• Jobs created: 16.6 million, including 1.6 million in construction and manufacturing
• Unemployment rate: Lowest average in 50 years
• Private sector manufacturing investment: Over $1 trillion
• Median household income: Increased by nearly $4,000
• New business applications: 21 million filed

India's Contribution To US Economy

During this period, India's economic footprint in the United States continued to expand significantly.

By 2024:

• Bilateral trade reached $212.3 billion, an 8.3 per cent increase from the previous year.
• US exports to India totaled $41.5 billion.
• According to NSA Jake Sullivan, speaking in January 2025 at IIT Delhi, "Indian private sector investment in the United States recently surpassed that of China... generating over 400,000 US jobs."
• By the end of 2020, Indian FDI in the US stood at $12.7 billion, supporting over 70,000 American jobs.
• Nearly 200,000 Indian students studied in the US, contributing an estimated $7.7 billion annually to the economy 

Trump's Return

Now back in office, Trump's return has shifted the tone of US-India trade relations. His tariffs have not spared even long-standing partners like India, considering that Indian companies have contributed to the US economy. 

According to a 2023 report by the Confederation of Indian Industry (CII), Indian companies have invested over $40 billion in the US and directly supported more than 425,000 jobs across 40 states.

The top ten states benefitting from jobs created by Indian companies included Texas (20,906 jobs), New York (19,162 jobs), New Jersey (17,713 jobs), Washington (14,525 jobs), Florida (14,418 jobs), California (14,334 jobs), Georgia (13,945 jobs), Ohio (12,188 jobs), Montana (9,603 jobs), Illinois (8,454 jobs).

The top ten states with the most reported FDI from Indian companies were Texas ($9.8 billion), Georgia ($7.5 billion), New Jersey ($4.2 billion), New York ($2.1 billion),  Massachusetts ($1.4 billion), Kentucky ($908 million), California ($776 million), Maryland ($720 million), Florida ($711 million) and Indiana ($582 million).

The  economic partnership between US and India has grown over the years, marked by trade, investment, and collaboration. While past administrations focused on deepening ties, the current challenges highlight the need for continued dialogue and cooperation