India should play its moves very carefully against a truculent and mercurial Trump administration.

It had agreed to enter into negotiations for concluding a bilateral trade agreement (BTA) with the US during Prime Minister Modi’s visit to US in February, which coincided with the announcement of “Fair and Reciprocal Trade”policy, the basis for the imposition of “reciprocal tariff”.

It is not clear why India agreed to launch the BTA negotiations now when the foreign economic policy of the US is at its most hawkish. In the past the Indian government had repeatedly turned down overtures from its largest trade partner to launch bilateral trade negotiations.

The timing of the BTA negotiations is more surprising since there is no evidence that US’ list of demands has changed. A recent report of the US Trade Representative, National Trade Estimate (NTE) Report on Foreign Trade Barriers testifies this. This report highlights ‘significant foreign barriers to US exports and US foreign investment in India and 56 other countries’. It set the stage for the April 2 tariff announcement. There has been an extraordinary sequence of events since then, culminating in a 90-day moratorium on tariff hikes, for all except China, announced on April 9.

A recap

To recap, Trump announced his “reciprocal tariff policy” on April 2, on 57 trade partners, ranging from 11 per cent to 49 per cent; this was to come into effect on April 9. Furthermore, an additional ad valorem duty of 10 per cent on imports from all trade partners introduced, implying that the two additional tariffs would be applied almost simultaneously.

Now, there is a pause on the implementation of “reciprocal tariff” on all countries except China for 90 days, and secondly, a steep increase in the tariff burden on China, which is now 145 per cent, according to the White House. The latter was ‘punished’ for retaliating against the “reciprocal tariff” and imposing retaliatory tariff of 125 per cent. The escalation of the tariff war against China was expected as Trump had threatened the same, should any trading partner retaliate against “reciprocal tariff”.

But Trump offered to reduce “reciprocal tariff” if trading partners offered concessions benefiting the American businesses, workers, and farmers. The temporary pause on the implementation of reciprocal tariffs has clearly been made to secure concessions from the trade partners.

Several advisers of Donald Trump particularly, Stephen Marin, chair of the council of economic advisers, Treasury Secretary Scott Bessent, and Peter Navarro, senior counsellor for trade and manufacturing, have explained that imposing high tariffs and to then offer the carrot by way of a 90-day pause, is a strategy to maximise concessions from partner countries.

Tariffs, a tactic

In a paper published immediately after Donald Trump’s election win, Marin argued, “tariffs create negotiating leverage for incentivizing better terms from the rest of the world on both trade and security terms. America would encourage other nations to move to lower tariff tiers, improving burden sharing”.

Navarro laid out the White House strategy, arguing that the pause in implementation was “part of a calculated negotiating tactic”, and insisted that the US is in a strong position heading into the bilateral trade talks and that the sudden shift (pause in implementation) was all part of the plan, “and a demonstration of Trump’s signature dealmaking style”.

Treasury Secretary Bessent asserted that the pullback had been the plan all along to bring countries to the bargaining table.

Now, coming back to demands made of India in the context of BTA, the deterrent for it is clearly the excessive concessions the US has sought in sensitive areas, including opening of India’s agricultural market for US agri-business and amendments to several key legislations and policies.

While listing out India’s so-called “trade barriers”, the USTR provides a long list issues/areas in which the Trump Administration would surely be seeking “concessions” during the BTA negotiations. The NTE Report makes it clear that the US is seeking reduction/removal of India’s tariffs ranging from agricultural products, motorcycles and automobiles, and drug formulations.

It is also evident that the US is seeking reversal of tariff increases on products of US export interest, namely, information and communication technology, medical devices, auto components and solar power equipment. US also wants changes in India’s domestic regulatory environment covering testing and certification requirement for telegraph equipment, dairy products, and genetically modified crops.

Eyeing IP laws

The US has for long targeted India’s patents and other intellectual property laws, seeking removal of public interest provisions. In case of the patent law, the provision preventing perpetuating monopolies on medicines, which the lawmakers had included to ensure affordable access to medicines, has consistently been targeted. There is a wide agreement in India regarding data localisation that is seen to be in the larger interest of Indian businesses, but the US government is pushing for its removal.

In agriculture, the US is ironically demanding lowering of India’s subsidies that are critical for the sustenance of livelihoods and domestic food security, while its own subsidies have increased nearly four-fold since it became a member of the WTO.

Worse still, the US is targeting the public distribution system for feeding the country’s poor. For the past three decades, India has consistently defended its agriculture policies, and there are no reasons for not doing so now.

A major concern is that even before the negotiations commenced, India seems to be accommodating US’ interests. The Budget lowered tariffs on motorcycles and bourbon whiskey. More recently, the government has agreed to increase the price of coronary stents, only because the US government had red-flagged the price control.

A few weeks back Foreign Minister S Jaishankar had asserted that the country will follow “India First” approach in FTAs, which should be the approach to counter Trump’s “America First” trade policy.

Therefore, the government’s priority must be to ensure that BTA negotiations secure benefits for the country and core interests in agriculture and health are not sacrificed under any circumstances. For too long, India has not put a price on partner countries’ access to its large domestic market; the BTA negotiations are the best opportunity to do so.

The writer is Distinguished Professor, Council for Social Development, and former Professor, JNU

Published on April 11, 2025

📰 Crime Today News is proudly sponsored by DRYFRUIT & CO – A Brand by eFabby Global LLC

Design & Developed by Yes Mom Hosting