Despite the Trump administration threatening India with reciprocal tariff, India can still negotiate a ‘favorable’ deal with the US through the Bilateral Trade Agreement (BTA) talks currently undergoing. Experts believe even with the threat of reciprocal tariffs hanging over India, the BTA talks give the country time to fully understand the repercussions of Trump’s move.
The two countries have agreed to negotiate ‘a mutually beneficial, multi-sector Bilateral Trade Agreement (BTA) by fall of 2025’. The negotiations have begun with Commerce Minister Piyush Goyal already in the US leading the talks. The two countries have set a bold target of taking the total bilateral trade to $500 billion by 2030 from the current $130 billion.
With Trump announcing the reciprocal tariff on India to come into force from 2 April 2025, there are doubts on the future of the Bilateral Trade Agreement between the two countries.
“Negotiating an FTA is an excellent manoeuvre to give India time and room to fully understand the implications and possibilities arising out of Trump turning the trade rules on its head,” says Sangeeta Godbole, former director general, Services Export Promotion Council, and former trade negotiator for India. She says the BTA allows give and take at the bureaucracy level where reasoning can work.
International trade experts are also of the view that Trump’s reciprocal tariff threat is part of his larger goal to get more out of India through the BTA.
Shishir Priyadarshi, former director, WTO and president, Chintan Research Foundation, told TNIE that the reciprocal tariff could very well be a larger plan of Trump to get more out of India under the BTA.
“This is a ploy to make India more flexible during the BTA negotiations. But India should not unilaterally give concessions to the US between now and till the time BTA is being signed,” he says.
There are several goods that can come under higher tariff if the US goes ahead to implement the reciprocal tariff on India. According to a study by the Global Trade Research Institute (GTRI), several large exporting goods could see duties increasing in double digits. For example, import duties on processed meat, fish and other processed food could go up by 25-28%, automobiles and auto parts can see weighted average tariff go up by 23%, shoes and footwear parts could go up by 15% and those on diamond and other gems by 13%.
However, Ashwini Mahajan, National Co-Convenor of Swadeshi Jagran Manch, says that Trump’s rhetoric is far removed from the economic realities. “The US is a country with high-cost of production, and that’s why the industry vanished from the US. If you raise tariffs, inflation in your country would go up,” he says.
He also expressed confidence that by the 2 April deadline, India would be able to negotiate ‘something’ favourable with the US government.