 "Can a trade deal with US shield India from the fallout of Trump’s tariffs?")
US President Donald Trump’s tariffs have shaken the world’s financial markets.
On Monday, the Sensex was down over 3,000 points, while the Nifty was down over 1,000 points.
The development comes days after Trump, on what he declared to be ‘Liberation Day,’ announced ‘reciprocal tariffs’ on a number of nations including China, Vietnam India and the UK.
Trump imposed a base tariff of 10 per cent that took effect on April 5 and a country-specific tariff set to take effect on April 9.
It also comes in the background of India negotiating a bilateral trade deal with the United States.
But what do we know about the deal? How will it help India fight tariffs?
Let’s take a closer look:
What do we know?
India and the US are currently in negotiations over what is known as the Bilateral Trade Agreement (BTA).
This is part of ‘Mission 500’ which aims to increase bilateral trade to $500 billion by 2030.
Bilateral trade between India and the US was estimated $190.08 billion in 2023.
This agreement was reached during Prime Minister Narendra Modi’s trip to the US in February.
As per Business Standard, the two countries have sought a ‘fair, balanced and equitable trade deal.’
Both sides are looking to finalise the agreement by the fall of 2025.
Representatives of India’s Department of Commerce and the Office of the US Trade Representative met in New Delhi in late March to discuss the matter.
This came weeks after Union Commerce and Industries Minister Piyush Goyal travelled to Washington, DC to meet his US counterparts Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick.
Indian Express reported that India had agreed to the BTA’s Terms of Reference (ToR) the day before the US tariffs were set to take effect.
This came after a directive from the Prime Minister’s Office (PMO).
The ToR sketches out the contours of the BTA.
It usually requires approval from the highest levels before discussions can commence.
“The PMO is keen on a swift finalisation of the deal,” a senior government official told Indian Express**.**
The ToR is yet to be finalised.
An official told the newspaper “everything is on the table.”
“FTAs take time. We have to be patient, unlike several other countries who have reacted immediately,” the official added.
How will it help India fight tariffs?
Moneycontrol quoted a senior government official as saying that New Delhi negotiating a bilateral trade deal with Washington would give it “first -mover advantage.”
This would thus protect the domestic economy from the US tariffs.
“We are the only country with whom US is negotiating a trade deal…so tariffs may go up now, but it will go down later. There will be no trade deal unless it is mutually beneficial to both countries,” the official added.
“India is better off than its competitor nations/regional rivals such as Indonesia, Vietnam, among others since higher reciprocal tariffs have been imposed on them,” the official told Business Standard.
The official further pointed out that Trump has the power to exempt India from the tariffs under Section 4C of the executive order.
It states, “Should any trading partner take significant steps to remedy non-reciprocal trade arrangements and align sufficiently with the United States on economic and national security matters, I may further modify the HTSUS to decrease or limit in scope the duties imposed under this order.”
Trump has expressed optimism that India will reduce its tariffs.
“I heard that India is going to be dropping its tariffs substantially. A lot of countries are going to drop their tariffs,” he said.
“We can also close deals by signing them in tranches; that is an option like we did with Australia,” the official added.
We are in touch with exporters and will provide help if required,” the official concluded.
Interestingly, India is also negotiating trade deals with the United Kingdom (UK), the European Union (EU), New Zealand, Peru, Chile, Oman.
What do experts say?
They say India must hold the line against Trump.
As Ajay Srivastava, former Indian trade officer and head of the think tank Global Trade Research Initiative (GTRI), told Indian Express, “Many of the proposed changes—in areas like agriculture, digital governance, and public health—pose serious risks to India’s ability to protect its small farmers, maintain food safety, uphold deeply rooted social norms, and secure its digital future. India is not opposed to reform or global cooperation, but any engagement must be fair, reciprocal, and respectful of sovereignty.”
They also say India could take advantage of the situation.
Rudra Kumar Pandey, Partner at Shardul Amarchand Mangaldas & Co, told Indian Express, “This differential could serve as a catalyst for the realignment of global supply chains, particularly for US companies looking to reduce dependence on China and diversify away from higher- tariff markets. India is uniquely positioned to benefit from this shift, especially in electronics and textiles, where it enjoys not only a tariff advantage but also a large and skilled labour force, rapidly expanding industrial infrastructure, and over $24 billion in incentives committed under Production Linked Incentive (PLI) schemes.”
A piece in Indian Express called for New Delhi to think bigger.
“…along with negotiating with the Trump administration and pushing ahead with the trade deal, Delhi must also pursue a more ambitious and broader agenda for trade reform,” the piece concluded.
Trump previously described Modi as a ‘great friend’ but said that India ‘hasn’t been treating us right.’
“India, very, very tough. Very, very tough. The Prime Minister just left. He’s a great friend of mine, but I said, ‘You’re a friend of mine, but you’re not treating us right.’ They charge us 52 per cent. You have to understand, we charge them almost nothing, for years and years and decades,” Trump said.
Trump previously called India a ‘ tariff king’ and a ‘big abuser’ on trade.
New Delhi is open to cutting tariffs on U.S. imports worth $23 billion.
Modi’s administration has taken a number of steps to win over Trump, including lowering tariffs on high-end bikes and bourbon, and dropping a tax on digital services that affected U.S. tech giants.
Trump’s tariffs could slow India’s economic growth by 20-40 basis points in the ongoing financial year and may cripple India’s diamond industry, which ships more than a third of its exports to the US, putting at risk thousands of jobs.
With inputs from agencies
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