6 Products Driving US Trade Deficit with India

The United States and India are trading more than ever, but the balance is heavily tilted. In 2024, the US trade deficit with India in goods climbed to $45.8 billion, with imports hitting $87.3 billion against exports of just $41.5 billion. The gap has been widening steadily as India cements its role as a global supplier of gems, textiles, pharmaceuticals, electronics, and chemicals—sectors where US demand is strong and domestic production is limited.

Here are the top product categories driving the US trade deficit with India, and why they matter so much to both economies.

India’s gems and jewellery exports to the US are the single largest contributor to the bilateral deficit. Exports totaled about $10 billion in 2024, roughly one-quarter of India’s total gems exports worldwide. Surat alone polishes nearly 90% of the world’s diamonds, and much of this output ends up in American jewelry stores and luxury retail chains. Lab-grown diamonds, a fast-growing segment, are also shipped in large volumes to the US, where consumer demand is surging for affordable alternatives to mined stones.

This category is more than a trade statistic—it represents a long-standing dependency. The US jewelry market, especially in the bridal and luxury segments, leans heavily on Indian supply chains for consistency and cost competitiveness. Without Indian stones, US retailers would face both shortages and higher input costs.

Tariff note: Gems & jewellery are among the goods targeted in the new US tariff round, meaning prices may soon rise for American importers.

Textiles and apparel are another bedrock of India’s exports to the US. In 2024, shipments topped $8 billion, spanning everything from T-shirts and dresses to home textiles like bedsheets and towels. India’s clusters in Tiruppur, Panipat, and Ludhiana have become integral to US sourcing strategies. American retail giants—including Walmart, Target, Macy’s, and Costco—rely heavily on Indian textile exporters for affordable, large-scale supply.

The importance of this category lies in India’s scale and specialization. India has a unique ability to produce both cotton-based basics at mass-market volumes and high-end artisanal fabrics for niche retailers. For the US, this dual advantage helps meet consumer demand across income brackets.

Tariff note: Apparel has been pulled into the 50% tariff net, which could squeeze Indian exporters and push US retailers toward Vietnam or Bangladesh.

Pharmaceuticals are one of India’s most strategic exports to the US. In 2024, imports reached $12.7 billion, with India supplying around 40% of all generic drugs used in the US. These include essential treatments for diabetes, cardiovascular conditions, and oncology. The affordability of India-made generics plays a vital role in keeping US healthcare costs under control.

Beyond finished drugs, India also exports some APIs (active pharmaceutical ingredients) to the US, though here it is itself dependent on Chinese intermediates. This creates a layered supply chain risk for Washington: the US depends on India for finished formulations, and India depends on China for inputs.

Tariff note: Finished pharmaceuticals have been exempted from the new tariffs, a recognition of their centrality to US healthcare affordability.

Electronics are a fast-emerging contributor to the deficit. US imports from India in this category totaled $14.4 billion in 2024, driven mainly by Apple’s decision to expand iPhone assembly in India. Reports suggest that around $7 billion in India-made iPhones were shipped to the US in 2024, and shipments in 2025 are already accelerating. This signals India’s move up the global manufacturing ladder, beyond its traditional strengths in textiles and gems.

For the US, this has strategic resonance. Diversifying supply chains away from China has become a bipartisan priority, and India’s rise as an electronics exporter helps Washington meet that goal. The fact that India is supplying not just low-value goods but high-value consumer electronics marks a shift in the nature of the deficit.

Tariff note: Smartphones and electronics have been carved out of the 2025 tariff hikes, largely due to lobbying from Apple and concerns over US consumer prices.

Auto parts are a quieter but critical driver of the trade gap. India exported $6.6 billion worth of components to the US in 2024, ranging from drivetrain parts and engine castings to safety systems. These parts slot directly into US automotive production lines, serving both Detroit automakers and EV manufacturers like Tesla.

The strength of Indian suppliers lies in cost efficiency and reliable quality. Many US auto manufacturers have long-term contracts with Indian vendors, making the relationship sticky and not easily replaced. This explains why auto components, though less flashy than gems or iPhones, are a constant contributor to the deficit.

Tariff note: Passenger car parts face 25% tariffs, while heavy/commercial vehicle parts are hit with the full 50%.

Organic chemicals may not grab headlines, but they are a vital part of the trade ledger. The US imported $3.6 billion worth of these chemicals from India in 2024, covering solvents, intermediates, and compounds used in pharmaceuticals, coatings, plastics, and packaging. These feed into a wide range of downstream industries in the US, making them strategically important.

India’s strength here lies in the scale production of intermediates at globally competitive costs. For US manufacturers, Indian inputs are often cheaper than domestic alternatives, which locks in the trade imbalance.

Tariff note: Most organic chemicals fall under the new 50% duty, though some API-classified chemicals tied to pharma may be exempt.

The US trade deficit with India is rooted in six categories worth more than $55 billion annually. These sectors—gems & jewellery, textiles, pharmaceuticals, electronics, auto parts, and chemicals—are not accidental; they reflect India’s structural advantages in labor, scale, and manufacturing ecosystems.

While Trump’s 2025 tariff push may shift the short-term trade flows, the underlying drivers of the deficit remain firmly in place. Unless the US builds competitive domestic capacity in these categories, or finds alternative suppliers, India will continue to play a defining role in America’s import basket—and by extension, its trade deficit.

As of 2024, the US goods trade deficit with India stood at ~$45.8 billion, with imports reaching $87.3 billion compared to exports of $41.5 billion. The gap has been widening steadily over the past decade as India strengthens its role in key export sectors like gems, textiles, pharmaceuticals, and electronics.

As of 2024, the US goods trade deficit with India stood at ~$45.8 billion, with imports reaching $87.3 billion compared to exports of $41.5 billion. The gap has been widening steadily over the past decade as India strengthens its role in key export sectors like gems, textiles, pharmaceuticals, and electronics.

India offers cost-competitive manufacturing, large-scale production, and established supply chains in sectors where US domestic output is limited or expensive. For example, Indian generic drugs lower healthcare costs in the US, while Indian diamonds dominate the global jewellery supply chain. This structural advantage fuels the persistent trade gap.

Yes. In August 2025, the US announced new measures raising duties on many Indian goods to 50%. However, smartphones/electronics and pharmaceuticals were exempted, while categories like textiles, gems, and heavy auto parts were included in the hikes.

Tariffs may shift some sourcing in the short term to countries like Vietnam, Mexico, or Bangladesh, but they are unlikely to erase the deficit. Many goods imported from India, such as generics and diamonds, are difficult to substitute. The underlying drivers—cost, scale, and specialization—mean India will likely remain a major US supplier.