From US tariffs to a trade deal: What are our strategic options?

India should not rush into a pact but instead watch how various scenarios might unfold while accelerating domestic reforms

- ARPITA MUKHERJEE

In the India-US Joint Statement of 13 February 2025, both sides set a target of $500 billion in bilateral trade by 2030. During the visit of the United States Trade Representative (USTR) to New Delhi (26-29 March 2025), the two sides agreed to discuss a mutually beneficial, multi-sector bilateral trade agreement (BTA), with the goal of finalizing its first tranche by the fall of 2025.

This announcement came amid some perplexity among Indian policymakers and trade experts, who were busy trying to decipher exactly what US President Donald Trump meant by the "reciprocal tariffs" he had promised to levy. Most experts felt that since India had high tariffs compared to the US, product-specific tariffs in areas of American export interest, along with some kind of tariff equivalent of non-tariff measures imposed by India, may constitute 'reciprocal tariffs'. If that were so, the USTR's National Trade Estimate Report on Foreign Trade Barriers (NTE 2025), would have helped identify US pain points, some of which could be addressed through a BTA.

The 2 April tariff announcements by Trump confused everyone because 'reciprocal tariffs' appeared to cover US trade imbalances with other countries rather than their tariff and non-tariff measures. Free trade agreement (FTA) partners of the US, like Vietnam and Japan, faced a high 'reciprocal tariff' on account of their positive trade balance with the US. Vietnam faced a reciprocal tariff of 46%, despite its comprehensive agreement with the US, and Japan with a limited trade deal faced 24%. None of America's FTA partners has been spared. So, trade agreements, irrespective of their scope and coverage, do not guarantee trade certainty with the US.