India is shifting towards a more proactive approach in its trade relations with the United States, especially as former President Donald Trump returns to the political scene.
Ahead of Trump’s second term in office, the Indian government has reached out to its industries, requesting them to outline their “offensive asks” from Washington. These demands primarily focus on areas that affect India’s export interests.
The government is seeking feedback from industry leaders on how they perceive trade relations with the US, considering the impact of Trump’s statements and policies. This feedback will play a key role in shaping India’s export strategy and defining its approach in future trade negotiations with the US.
This exercise takes on added significance due to Trump’s previous threats to impose reciprocal taxes on India, accusing the country of levying high tariffs on certain US goods.
The government is working to formulate a response to these challenges, ensuring that India’s export sector remains competitive and able to benefit from fair trade practices.
In addition to these discussions, India’s Ministry of Commerce and Industry is closely examining the details of the mini trade deal that was under negotiation during Trump’s first term.
There is uncertainty around the status of this deal, with officials stating that “negotiations, discussions, retaliation, dispute or mini trade deal, nothing is off or on the cards.” The future of this deal will depend on Trump’s team, which is currently being put together as he prepares for his return to office.
The US remains one of India’s most important trading partners. Between April and November 2024, India’s goods exports to the US amounted to $53 billion, while imports stood at $30 billion.
This strong trade relationship has seen US imports from India grow at a compound annual growth rate of 10.48% from 2001 to 2023, compared to an overall import growth rate of 4.76%. As such, India’s position in US trade is crucial, and the government is keen to preserve and expand this relationship.
India will need to make a strategic decision about the mini trade deal discussed during Trump’s first term. This decision will depend on the composition of Trump’s new team and the policy statements that follow.
Meanwhile, think tanks like the Global Trade Research Initiative have suggested a five-pronged strategy to safeguard India’s interests.
This strategy includes diversifying IT exports, which currently rely heavily on the US market. By reducing its dependence on a single market for IT exports, India can mitigate the risks associated with potential tariffs.
Other components of the strategy involve lowering import tariffs, strengthening data policies, rejecting the Indo-Pacific Economic Framework (IPEF) trade pillar, and boosting the Make in India initiative.
These suggestions aim to make India’s economy more resilient and self-sufficient, particularly in the face of any disruptions in trade with the US.
India and the US are both part of the IPEF, which is structured around four main pillars: trade, supply chains, clean economy, and fair economy, covering issues like tax and anti-corruption.
While three of these pillars are already operational, the one related to trade remains inactive. India has opted not to engage in the trade pillar, which further adds to the complexity of India’s relationship with the IPEF and its trade negotiations.
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