India and Trump still don't have a tariff deal: Here's why that matters

Time of India

5 days ago

India was eager to start negotiating with President
Donald Trump
over tariffs. Prime Minister Narendra Modi visited Washington right after the inauguration. Hopes were high for a quick trade agreement with a reelected president who prizes deals.
Six months later, there is still no deal. With tariffs threatened and deadlines blown, India and the United States are up against a wall. On Friday, the United States is ready to impose a 26% tariff on all goods it imports from India.
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Dozens of countries are facing the same imperative. But India, a democracy and the world's most populous country, is a major commercial partner of the United States. Total trade between the two countries was roughly $130 billion last year.
The nations have deep cultural and demographic ties. Indian immigrants and Americans with Indian roots occupy a stratum of leadership roles in U.S. business, academia and politics.
Their economic ties are of vital and growing importance, to India especially. And for 25 years, Washington has been courting India as a military partner, sometimes explicitly as a counterweight to China.
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Indian officials have been shuttling back and forth from New Delhi to Washington for months. On Thursday, India's commerce minister, Piyush Goyal, told the Reuters news agency that the negotiators were "making fantastic progress." There is the real prospect of talks going beyond this week. The Indian government has invited Trump to India for a defense summit in the fall, when Goyal has said he believes a bigger deal could be struck.
But other trading partners have already announced deals with the United States, starting with Britain and on Sunday with the European Union. Trump has bagged other frameworks across Asia from Vietnam, Japan, the Philippines and Indonesia. India has struck agreements of its own, most notably with Britain.
Those deals suggest the outlines of what India might expect: tariffs of 15% to 20% to be paid on India's exports to the United States, and no tariffs at all for most American exports. Tricky issues were left vague. Most of the deals involved a meeting if not a phone call between Trump and a head of government.
Modi and Trump, both nationalistic showmen, are said to enjoy a personal rapport. Since May 10, however, when Trump started claiming credit for a ceasefire in a conflict between India and Pakistan -- and then invited Pakistan's military leader for a five-day official visit -- that glow has worn off.
The status of the negotiations is murky, and the unpredictable role that Trump has played in other deals makes a possible resolution of the U.S.-India talks impossible to map.
Among India's top exports to the United States are pharmaceuticals, auto parts, electrical goods and gemstones in different grades of refinement. In addition to any concessions Trump might want to extract from India on these products, he has already imposed separate, 25% tariffs on auto parts from virtually the entire world and is threatening the same on drug imports.
Trump has said repeatedly that his tariffs are aimed at wiping out U.S. trade deficits. India runs a surplus with the United States that any new tariff would likely reduce.
One grave risk for India is the possibility that its customers will get stuck paying higher rates than its Asian competitors. With Vietnam being hit by a 20% rate, India could lose a rare advantage if it got a higher rate.
Multinational companies are moving production out of China, and India is jockeying for their business. Apple and its partners are investing billions to make more iPhones and other products in India.
American businesses are also keen to get more access to India's consumers. As economies stall and populations shrink in most of the world, India is giant and growing.
That could prove a sticking point. India has a long history of using tariffs to protect its markets from foreign products. Trump called India "the tariff king" during his first term.
U.S. tariffs of 15% would punish imports more harshly than any American government has done since President Herbert Hoover was in office. India, however, has long maintained a complicated web of tariffs with an average rate of 12%.
Some Indian exporters have said they would like to "zero out" their tariffs with the United States: to accept the foreign competition that zero tariffs on American imports would bring, so long as they could sell with equal freedom to the American market.
Other Indian businesses, especially in agriculture, don't want to give up their protections, fearing that industrial-scale import of American products could be devastating to India's family farms and the country's food security.
Ultimately, it comes down to Trump.
Mukesh Aghi, president of the U.S.-India Strategic Partnership Forum in Washington, said he believes the Indian side should brand any trade agreement as "a trillion-dollar deal."
"The president wants to talk to the head of state and then say, 'We have a deal.' It's about the headlines," Aghi said.
This article originally appeared in The New York Times.
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