The economic relationship between the United States and India has been driven perilously close to a rupture in the past month. President Trump is ready to impose 50 percent tariffs on Indian goods, starting next week. Those tariffs in turn threaten to wipe out businesses that depend on the export of Indian electronics, gems, seafood, carpets and more.
Lost in the tumult is the value that both the United States and India derive from the services part of their total trade, which topped $200 billion last year.
Mr. Trump has focused on the $46 billion deficit in goods that the United States ran with Indian companies in 2024. But over the same period, Indian and American companies bought and sold, in virtually equal amounts, $84 billion worth of services. The two countries have run a nearly equal balance in the exchange of services for several years.
A big reason is that two-thirds of Fortune 500 firms, from Meta and Microsoft to Walmart and Lowe’s, now rely on offshore operations across India.
In India’s biggest cities, multinational companies with American headquarters are building permanent corporate offices to do work across the world. Their annual payroll is far greater than the U.S. trade deficit Mr. Trump is concerned about. That is money that helps drive India’s economy and benefits companies with deep roots in the United States.
In the southern cities of Bengaluru and Hyderabad, Goldman Sachs has more employees, who are managing operations around the world, than it has in Mumbai, India’s financial capital. And on Monday, it announced an expansion in Mumbai, with a new office 50 percent larger than its existing location. Those bankers work the local stock markets, now the world’s fourth most valuable.
By definition, traded services are less tangible than traded goods. In Mr. Trump’s first term, his aides and Indian negotiators batted around tariffs on Harley-Davidsons, bourbon and pecans.
But services are no less important to American bottom lines. Globally, the United States sells more value in services than it buys. Important categories include transportation, education, finance and consulting. American companies in each of those categories are big earners in India.
India sends the greatest number of foreign students to the United States. Every dollar they spend in tuition counts as an export of services from the United States to India. Their airfare does too (unless they flew on Air India), and so do any medical expenses they incur in the United States.
The services traded between the two countries are unusually complementary.
“In India, we have this unique model,” said Amitendu Palit, a former Indian trade official and now a senior research fellow at the National University of Singapore. In services, the country’s labor force is capable of handling all kinds of corporate functions, from entry level to executive, like nowhere else in the world.
The value of the services provided by the India-based offices of American companies, Mr. Palit said, helps bolster the profits of the parent companies. “That’s basically what’s pushing the bilateral services trade,” he added.
Unlike trade in goods, the two countries’ trade in services has been growing by double digits in recent years, and growing more sophisticated, too. Customer service and telemarketing were typical services provided by Indian firms to American clients 20 years ago. Now Indian workers, hired directly by American subsidiaries, are doing cutting-edge work in research labs, engineering oil fields and devising legal strategies.
Services are especially important to the economies of India and the United States, relative to the rest of Asia. To China, which last year ran a $1 trillion trade surplus with the world, and its neighbors Japan and South Korea, exported goods are the lifeblood of economic activity. The same holds for most of Southeast Asia as well as India’s neighbors Bangladesh and Sri Lanka.
India has made efforts to catch up with them. “Make in India” has been the slogan for its factory-focused development programs since 2015. The chief appeal is that factory work tends to create a lot of jobs, of the kind that India’s young population desperately needs.
But the portion of the national economy that goes into manufacturing has actually shrunk in the past decade, outpaced by employment in services. Economists point to the success of foreign companies’ offshore office parks, expected to employ at least 2.5 million Indians around the country by 2030, nearly all of them taking home salaries to put them in the upper-middle class.
As a result, the strongman stare-down that India’s prime minister, Narendra Modi, is locked in with Mr. Trump holds enormous consequences for India. Forcing American importers pay a 50 percent tariff on Indian goods could damage the livelihoods of workers across India.
Mr. Trump has not publicly threatened to try to stop American companies from setting up shop in India. But companies with India-based operations are worried that the tensions between the governments could jeopardize the billions of dollars they have invested, said two industry representatives who asked not to be named to talk openly about their concerns.