The US and Japan reached a trade agreement regarding market access for certain agricultural and industrial goods.
During a call with Modi on Monday, Trump “emphasised the importance of India increasing its procurement of American-made security equipment and moving toward a fair bilateral trading relationship,” according to a White House statement.
India is also likely to seek investment commitments from the US similar to those in its trade pact with the European Free Trade Association (EFTA), which includes a binding commitment of $100 billion of investments and creation of one million direct local jobs by EFTA bloc companies.
Trump’s recent executive order on his administration’s America First trade policy has prompted India to look at the potential of a limited trade agreement.
Commerce Ministry, MEA at Work
The commerce and industry ministry has already sought inputs from Indian companies on their areas of interest to develop India’s US export strategy.
The ministry of external affairs is working closely with it on the limited trade deal with the US, providing the required political support, said the people cited earlier.
The possibility of a limited trade pact with the US had been floated during Trump’s first term (2017- 21) but could not be followed through due to the pandemic and subsequent change of guard at the White House.
“A trade deal, even partial, will secure enhanced market access for Indian and US companies,” said Harsh V Shringla, former foreign secretary and US ambassador.
“More importantly, this will serve as a confidence booster. Significant progress had been made on such a deal during Trump 1.0, and this found mention in the joint statement issued during Trump’s visit to India in February 2020. It should be possible to take this forward, from where we left off in 2020, to an early conclusion.”
Shringla played a key role in shaping the Howdy Modi and Namaste Trump events in the US and India, respectively, and made significant contributions to boosting ties both as ambassador to the US (2019-20) and later as foreign secretary (2020-2022).
Pradeep Mehta, secretary general at CUTS International (Consumer Unity & Trust Society), a think tank on global trade issues, said the US’ aggressive posture on trade needs to be dealt with in a businesslike manner.
“A few of the prominent high tariffs on upscale goods of American export (and political) interest can be brought down, since this issue hogs all limelight and impedes progress on other matters,” he said. “This can open the door to serious negotiations for a deal covering the whole gamut of trade, technology and investment, which will be beneficial for both India and the US in the longer term.”
Legacy trade frictions relating to sectoral interests in agriculture, medical devices, etc, along with standard tariff and non-tariff negotiations, can be picked up from where the two sides left them during Trump’s first term, Mehta said, adding, “Modi’s upcoming visit will indicate how far both parties have been able to pave the way for a win-win proposition.”
However, commitments on services and movement of professionals are not likely to be a part of any agreement between the US and India. The US is India’s largest trading partner. Two-way trade surpassed $118 billion in FY24, with India having a surplus of $32 billion.
On Monday, Trump threatened tariffs against India, China and Brazil. Speaking to House Republicans at a Florida retreat, the US President said the three countries were acting in their own interests.
“We’re going to put tariffs on countries and people that really mean harm to us,” he said. “Well… they mean us harm, but they basically want to make their country good. China is a tremendous tariffmaker, and India, Brazil, and so many other countries. (But) we’re not going to let that happen any longer… because we’re going to put America first.”
