Former President Donald Trump takes credit for new trade deal proposal from India. The agreement would remove almost all tariffs on U.S. exports. This declaration comes at a time when India is hoping to strengthen its economic ties with the United States, India’s biggest trading partner. These current negotiations represent a breakthrough from India’s historically defensive approach to trade agreements. This move particularly affects tariffs that have historically protected its agricultural markets.
Last year India exported only about $17.19 billion worth of goods to China. This number alone shows India’s deep and concerning dependence on imports from its arch-rival neighbor. As U.S.-China tensions escalate, Indian officials waste no time pushing forward. They’ve taken concrete steps to step up their game on boosting trade and economic ties with the United States. That change started after Indian Prime Minister Narendra Modi’s historic visit to the White House in February. This visit was one of the first tangible moves in that direction, towards real trade negotiations.
Trade Deal Negotiations
In fact, India and the U.S. have committed to conclude a mini trade deal between the two countries by the end of this year. That’s why these negotiations are so critical. It’s not just that they happen, as we see today with India suddenly seizing on the prospect of new trade deals after decades of skepticism. India has a long history of using tariffs to shield its domestic agricultural markets from dumpings of lower-cost imports. India’s average tariff rate is 17 percent—in the U.S. it’s just 3.3 percent.
This new potential deal would drastically change the way American products are allowed into Indian markets. Trump remarked on the challenges U.S. businesses face in India, stating, “It is very hard to sell in India, and they are offering us a deal where basically they are willing to literally charge us no tariffs.” This declaration signals a bigger shift in the trade negotiation playing field between the U.S. and China.
India’s recent willingness to ease export regulations on several high-value U.S. imports, including car parts, demonstrates its commitment to fostering closer economic ties. The potential agreement could gradually introduce zero tariffs on car parts, but only reciprocally and only up to a certain cap. This step was a strong indication of India’s resolve to encourage a better trade ambience.
Economic Context
The economic backdrop of these negotiations is remarkable. Today the U.S. is India’s largest trading partner, with bilateral trade reaching an estimated $129 billion in 2024. Last year, India managed a notable $45.7 billion surplus with the U.S. This impressive gain was largely driven by record exports of pharmaceutical products, electrical machinery and jewelry.
New Delhi desires deference from Washington more befitting a close ally, similar to the treatment extended to the United Kingdom or Japan. It aims for equitable access to critical tech industries, such as AI, biotech, and semiconductor manufacturing. This request is a powerful signal as to India’s strategic interest in being brought into the fold of important technological developments and markets.
India also recently inked a pact with the UK that will substantially lower duties on many goods, demonstrating its proactive approach to international trade agreements. A senior nine-person delegation of Indian officials will make the trip to the U.S. later this month. Their hope is to raise the level of debate on this important trade agreement.
Future Prospects
Looking ahead, India is eager to finalize a trade deal with the U.S. within the 90-day pause announced by Trump on April 9 concerning reciprocal tariffs for major trading partners. Unfortunately, these negotiations have the potential to cause enormous harm to both economies. We consider them to be more trade facilitating in that they often promote increased market access and reduced trade barriers.
As the discussions continue, producers, processors, exporters, and policymakers from both countries will be keenly attuned to each development. The potential removal or reduction of tariffs could significantly impact industries ranging from agriculture to technology, influencing economic growth and job creation on both sides.
