Washington trade talks with India have stalled, sources say
Before US President Donald Trump announced on Wednesday that he would impose 25 per cent tariffs on imports from the country, the Indian side was expected to visit. However, Indian negotiators will not be coming to Washington in mid-August as a planned follow-up to their previous meeting about two weeks ago, according to one person familiar with the issue.
A scheduled trip by the US Trade Representative Jameison Greer to New Delhi later in the month also appears unlikely if the two sides do not reach a consensus on market access.
The apparent setback follows five rounds of negotiations between April and July after Trump threatened India with 26 per cent so-called reciprocal tariffs on April 2.
Adopting a harsh tone on India in a social media post on Thursday, Trump called the Indian economy 'dead', saying, 'we have done very little business' with the South Asian country because of 'too high' tariffs.
'I don't care what India does with Russia. They can take their dead economies down together, for all I care,' he wrote, referring to India's import of Russian oil and defence equipment. On Wednesday, he threatened a 'penalty' on India for buying Russian oil and defence equipment without making it clear what that penalty could be.
India's agricultural sector supports the livelihoods of roughly 42 per cent of the country's population, making Trump's demand for access politically risky for Prime Minister Narendra Modi and ratcheting up tension between Washington and the world's most populous country.
One of the sources said the mood in New Delhi felt 'bitter', while both sources said the US negotiators have remained firm in demanding a 'complete' opening of the Indian market, an approach India has rejected to protect its domestic industries and farmers.
Last week, another person familiar with the matter had described the talks as a 'total mess' behind the scenes, adding that agriculture was a political no-go zone for Modi's government.
US Treasury Secretary Scott Bessent on Thursday told CNBC that 'the whole trade team has been frustrated' with India, saying the country has not been a 'great global actor'.
'India's red lines on agriculture and dairy are probably inviolable,' according to Rick Rossow, chair in US-India Policy Studies at the Center for Strategic and International Studies, a Washington think tank.
If the US demands that these areas be opened as part of any deal, he said, 'we may never conclude an agreement'.
According to Rossow, Greer will only make the trip to New Delhi 'if there is a realistic chance of resolving any pending issues in the deal".
'If it looks like an empty trip – circling the drain on the last issues without hope of a breakthrough – the visit might be cancelled,' he said.
One source said India wants its recent free trade agreement with Britain, which opened British markets to Indian agricultural and textile products, among others, to serve as a model for a deal with the US.
Meanwhile, the US side views its recent trade agreement with South Korea, which Trump claimed opened Korean agricultural markets to American goods, as the kind of access it expects from New Delhi.
Another source familiar with the thinking on the US side said that Trump has also been keen on some headline-worthy announcements that include big investments or significant energy and defense purchases.
Rossow said he suspects that a Phase 1 deal will 'not vary dramatically from the other deals India has signed.'
He added that India seemed 'willing to commit to some big announcements in terms of investment and government-directed purchases in areas like hydrocarbons.'
'With President Trump's characterisation of Prime Minister Modi as the 'tariff king' paired with the enormous size of the Indian market, the deal itself will be big news – if and when it's concluded,' Rossow said.
India's membership in Brics, a bloc of emerging Global South economies, and Trump's closeness with Pakistan have also become irritants in the US-India relationship.
Hours after announcing new tariffs on India, the US president said his team had reached a deal with Islamabad and criticised New Delhi's active role in Brics.
'Brics, which is basically a group of countries that are anti-the United States, and India is a member of that if you can believe it ... It is an attack on the dollar and we are not going to let anybody attack the dollar. So it's partially Brics and it's partially trade,' Trump told reporters on Wednesday.
On the other hand, the deal with Pakistan, according to Trump, allows the two countries to 'work together on developing their massive oil reserves'. As per an executive order signed by Trump on Thursday, a 19 per cent tariff will be imposed on imports from Pakistan.
The US is one of Pakistan's top export destinations. India's arch-rival sold over US$5 billion worth of goods to the US last year and imported about US$2.1 billion.
In June, Pakistan's army chief, Field Marshal Asim Munir, met with Trump at the White House. He offered Pakistan's support in such sectors as crypto and critical minerals.
'India is still an important partner for the United States and vice versa; a success on the trade talks would have been a strategic win, especially under the complex regional circumstances, but all is not lost yet,' according to Farwa Aamer, director of South Asia Initiatives at the Asia Society Policy Institute.
New Delhi is 'cautious but committed', she said.
'As deals come through with its neighbours and competitors, it may just provide it enough impetus to make bold moves and accelerate progress on negotiations on a more comprehensive deal while weathering the temporary storm,' she said. - SOUTH CHINA MORNING POST
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