India Studies US-EU Trade Agreement As Cautionary Tale Before Finalizing Trump Deal

Hans India

20 hours ago

As President Donald Trump's latest tariff measures prepare to take effect on August 7, Indian policymakers are carefully analyzing what constitutes an unfavorable trade agreement by examining the recently concluded US-European Union trade deal. The arrangement between Washington and Brussels has drawn sharp criticism from various quarters, with detractors arguing that while one party secured advantageous terms, the other received significant financial obligations.
Government circles in New Delhi are increasingly concerned that hastily agreeing to Trump's proposed terms could result in a similarly unbalanced trading relationship. Officials note that in Trump's approach to international negotiations, countries that have been characterized as allies often face harsher treatment than others, with diplomatic softness being interpreted as vulnerability by the current US administration. Indian negotiators believe it may be prudent to observe China's eventual agreement before determining whether India's potential deal offers genuinely favorable conditions.
The US-EU agreement effectively imposes a 15 percent baseline tariff on most European exports to America, while providing Washington with enhanced market access to the EU at substantially reduced tariff rates without offering meaningful concessions in return. Additionally, Brussels has committed to investing 600 billion Euros in the United States and purchasing 750 billion Euros worth of American energy over the next three years.
The European Union's capitulation followed a predictable pattern that has characterized the US administration's approach with other early signatories, including South Korea and Vietnam. Initially, Brussels proposed zero-for-zero tariffs, later sweetening their offer to zero-for-10 percent tariffs with sectoral exceptions like automobiles. The decisive moment came when Trump threatened a 30 percent tariff unless an agreement was reached by August 1, prompting European Commission President Ursula von der Leyen to accept what she described as the best possible arrangement under the circumstances.
When Trump's tariff campaign began in March, observers believed the President focused primarily on achieving headline tariff numbers with each nation. However, agreements finalized closer to the August 1 deadline have expanded to include substantial investment commitments, as demonstrated by the EU deal. Japan has pledged $550 billion in investments, while the United Kingdom has agreed to adopt a structured negotiation approach for investments. South Korea has committed $350 billion to US projects that will be "owned and controlled by the United States" and "selected by President Donald Trump," while simultaneously agreeing to allow most American goods duty-free entry in exchange for the 15 percent tariff rate.
According to Deborah Elms, Head of Trade Policy at the Hinrich Foundation in Singapore, while some preliminary agreements locked in 15 percent headline rates, others were less favorable. Vietnam, despite having a deal, received 20 percent tariffs plus an additional 20 percent on trans-shipped goods, while other ASEAN nations without agreements received 19 percent rates. Switzerland, despite early agreement, faced 39 percent tariffs, while the United Kingdom, despite its trade deficit with the US, received 10 percent rates. Elms emphasizes that all rates remain subject to change, providing little stability assurance.
Notably, some ASEAN countries without formal agreements secured better tariff treatment than early signatories like Vietnam. Beyond headline tariff figures, questions persist about whether other deal provisions will materialize. Detailed texts remain unavailable for most signed agreements, and even when specifics emerge, terms may be modified during implementation. Traditional trade deals typically span thousands of pages and require months or years of negotiation, making this rapid-fire approach across multiple countries within weeks particularly extraordinary. Only the China negotiations and extended India discussions appear to involve substantial actual negotiations.
Legal and implementation challenges compound these concerns. US threats to impose additional tariffs on goods from other countries violate Article I of the General Agreement on Tariffs and Trade and contradict bound tariff commitments under Article II of GATT, which assures that tariffs will not exceed mutually agreed rates. European concessions to the United States could face challenges from other countries if these arrangements violate World Trade Organization trading rules, as preferential US access to EU markets may require offering identical terms to others under WTO provisions. Additionally, Trump's trade-related executive orders face domestic legal challenges within the United States.
Practical implementation questions also arise. Can EU member countries realistically increase American energy imports by 750 billion Euros over three years? Can the Commission guarantee 650 billion Euros of US investments, given that much involves private sector rather than public spending by individual companies? The American customs department and trade officials face significant challenges monitoring and implementing multiple country-specific provisions. The delay of July 31 tariff rollouts until August 7 allegedly provided preparation time for American Customs, though smooth implementation at major US ports remains unlikely given the compressed timeline.
The European experience serves as a cautionary example for India as it navigates its own trade negotiations with the Trump administration. The pattern of initial concessions followed by escalating threats and eventual capitulation that characterized the EU deal highlights the risks of rushing into agreements without adequate preparation and leverage. Indian policymakers appear determined to avoid similar pitfalls while pursuing mutually beneficial trade arrangements that respect both nations' economic interests and sovereignty.