While former President Trump continues to voice concerns over trade deficits with various nations, including India, a closer examination reveals a more nuanced reality. Despite claims of a significant trade deficit, the United States appears to be quietly generating substantial revenue from India through various channels, potentially leading to a considerable trade surplus when all factors are considered.
Trump, on February 13, 2025, claimed that the U.S. had a $100 billion trade deficit with India. However, reports indicate that the actual trade deficit for 2024-25 was approximately $44.4 billion. The Global Trade Research Initiative (GTRI) suggests that Trump's narrative is misleading and incomplete because it primarily focuses on trade in goods and services while overlooking other significant financial inflows from India to the US.
The US is estimated to earn between $80-85 billion annually from India through sectors such as education, digital services, financial operations, intellectual property royalties, and arms sales. These earnings are not typically reflected in standard trade statistics, leading to a distorted view of the economic relationship between the two countries.
Indian students contribute an estimated $25 billion annually to the US education sector. Furthermore, American tech giants like Google, Meta, Amazon, Apple, and Microsoft generate between $15-20 billion annually from India's expanding digital market through app sales, cloud services, and advertising revenue. US-based financial firms, including consulting firms and investment banks, also reap substantial revenues, estimated at $10-15 billion each year. Additionally, US pharmaceutical companies earn close to $2 billion through patents, drug licensing arrangements, and technology transfers. American auto majors make between $800,000 and $1.2 billion in licensing and technical services. The entertainment industry also benefits, with Hollywood and American streaming platforms like Netflix earning another $1-1.5 billion. Sales of US arms to India are another significant contributor, although exact figures remain confidential.
Factoring in these "hidden" earnings, the US isn't running a deficit with India. Instead, it holds a surplus estimated to be between $35-40 billion.
Amidst these financial dynamics, the US and India are engaged in ongoing negotiations for a bilateral trade agreement (BTA). These discussions aim to address trade barriers and promote a more balanced exchange of goods and services. The US seeks to reduce tariffs on industrial goods, automobiles, wine, petrochemicals, dairy, and farm produce, while India is pushing for concessions in labor-intensive sectors and easier visa regimes. Both countries have finalized the terms for the BTA and aim to finalize the first phase by fall 2025.
US Vice President JD Vance has described Prime Minister Modi as a tough negotiator, and said that India has benefited from the US for a very long time. He has also stated that the US is determined to rebalance the trade relationship, potentially opening Indian markets to American technology and agricultural products, fostering job creation.
Despite Trump's rhetoric about trade deficits, the US-India economic relationship is complex and multifaceted. While the trade in goods and services may show a deficit for the US, the substantial revenue generated through other channels suggests that the US is, in fact, profiting significantly from its economic engagement with India. This hidden surplus gives India every reason to confidently enter free trade agreement negotiations, pushing back against inflated deficit claims and demanding fair, balanced terms that reflect the full economic relationship.
