The trade battle and possible pact
A key highlight of the talks between Narendra Modi and Donald Trump was a commitment to make it easier for companies from both countries to invest in each other’s markets
Washington: A trade deal, an ambitious target for bilateral trade, and a commitment to make it easier for companies from either country to invest in the other were among the highlights of the talks between Indian Prime Minister Narendra Modi and US President Donald Trump on Thursday.
The two countries have sparred (on the trade front) on everything from shrimp and liquor to dairy products and the standards for hi-tech equipment, and a trade deal could resolve most of the issues, including one that figured prominently on Thursday -- tariffs.
On Thursday afternoon eastern time (early Friday morning IST), President Donald Trump signed an order that laid the pathway for the imposition of reciprocal tariffs on countries which, according to American assessment, made it more difficult for American products to enter their markets through higher tariff and non-tariff barriers than the US had for their products. Among the countries he singled out for high tariffs was India, throwing along the way a barb about how it was “very difficult” to do business in India. The reciprocal tariffs could come as early as April 1.
On Thursday evening, Trump met Modi and, both in the opening remarks at Oval Office and at a joint press conference, spoke about India’s high tariffs again. He said he was unable to address the issue in the first term, and this time, he claimed he had made it easier by doing exactly to India what India did to US.
And on Thursday night, when the India-US joint statement was released , there was the announcement of “mission 500”, declaring that the two countries had the aim of more than doubling total bilateral trade to $500 billion by 2030 and had decided to deepen trade ties “to promote growth that ensures fairness, national security and job creation”.
Asked about the discordant note due to the issue tariffs through the day, foreign secretary Vikram Misri, at a press conference, said, “I would say that we have been hearing about tariffs for quite some time. In today’s discussion, the issue came up normally. They both had their perspectives. What’s worth looking at is that we have a way forward in terms of the undertaking to start discussing bilateral trade deal. It is a very good opportunity to take forward something and conclude something that was foreseen in the first Trump administration.”
Early trade deal in 2025
Both Modi and Trump recognised that this ambition required “new, fair-trade terms” — the word “fair”, incidentally, has become a Trump favourite to describe America’s desired relationship with all trading partners.
They then announced an ambitious timeline to have the first tranche of a bilateral trade agreement (BTA) by the fall of 2025 with senior representatives leading talks. This is when Trump is scheduled to come to India for the Quad leaders’ summit.
“To advance this innovative, wide-ranging BTA, the US and India will take an integrated approach to strengthen and deepen bilateral trade across the goods and services sector, and will work towards increasing market access, reducing tariff and non-tariff barriers, and deepening supply chain integration,” the statement said.
While both market access and barriers have been key US complaints, people familiar with the development on the Indian side said that Modi had detailed discussions with Trump on the concerns on both sides regarding market access and the concerns arising from “other territories with over capacities that take advantage of consumption in countries like India and the US”, a clear reference to China.
In the statement, injecting a note of hope, Modi and Trump also welcomed “early steps to demonstrate mutual commitment to address bilateral trade barriers”.
“The United States welcomed India’s recent measures to lower tariffs on US products of interest in the areas of bourbon, motorcycles, ICT products and metals, as well as measures to enhance market access for US agricultural products, like alfalfa hay and duck meat, and medical devices. India also expressed appreciation for US measures taken to enhance exports of Indian mangoes and pomegranates to the United States,” the statement said. Some of the decisions on the Indian end were taken as recently as the budget, largely with an eye on the US political context, while some of the decisions on the US end were taken by Biden administration.
For the future, Modi and Trump pledged to collaborate to enhance bilateral trade by increasing “US exports of industrial goods to India and Indian exports of labour-intensive manufactured products to the United States”. The two sides, the statement said, will also work together to increase trade in agricultural goods, without giving more details -- perhaps on account of the politically sensitive nature of the issue.
Where Indian companies invest
Trump has been keen on bringing investments into the US. A lesser known story about the investment story is that Indian companies have invested over $40 billion and created 425,000 jobs in America according to the last publicly available data from the Confederation of Indian Industry in 2023.
“The leaders committed to drive opportunities for US and Indian companies to make greenfield investments in high-value industries in each other’s countries. In this regard, the leaders welcomed ongoing investments by Indian companies worth approximately $7.35 billion, such as those by Hindalco’s Novelis in finished aluminium goods at their state-of-the art facilities in Alabama and Kentucky; JSW in steel manufacturing operations at Texas and Ohio; Epsilon Advanced Materials in the manufacture of critical battery materials in North Carolina; and Jubilant Pharma in the manufacture of injectables in Washington. These investments support over 3,000 high-quality jobs for local families,” the statement said.
The mix of investments and some flexibility on tariffs appears to have bought India time. And 2030 is a distant deadline. But the fall is merely six months away -- April 1 is even closer -- and the US administration is taking the deadline seriously. India itself has also been keen on a trade understanding with US. Whether this translates into an early deal is the test for trade negotiators and the political bosses who will have to decide on how far to go is to be seen.