When U.S. Vice President JD Vance and Indian Prime Minister Narendra Modi met Monday in New Delhi, many other countries were watching for clues on how the two sides would deal with the onerous tariffs unleashed by Vance’s boss.
But experts warn that India’s response to U.S. President Donald Trump’s tariff threats — even if successful — might not offer a general blueprint for other countries since each has a unique relationship with the United States.
A flat 26% tariff rate on inbound goods from India into the United States — now under a 90-day delay — has pushed New Delhi to rapidly engage with Washington in negotiations over a trade deal that not only addresses India's trade surplus, but also nudges the country to purchase more defense, tech and energy products from the U.S.
And since India is poised to become one of the primary global destinations for production and investment, the move also has geopolitical implications as Washington ramps up efforts to bring about a greater global decoupling from China.
‘Significant progress’
At Monday’s meeting, Vance and Modi touted “the significant progress” made in the negotiations for a “mutually beneficial India-U.S. bilateral trade agreement (BTA)” as the two sides pledged to continue efforts “toward enhancing cooperation in energy, defense, strategic technologies and other areas.”
Vance, who arrived in India with his family earlier that day for a largely personal four-day visit, also announced the finalization of “terms of reference” for negotiations, “laying down a roadmap” for further discussions about “shared economic priorities.”
“The BTA presents an opportunity to negotiate a new and modern trade agreement focused on promoting job creation and citizen well-being in both countries, with the goal of enhancing bilateral trade and supply-chain integration in a balanced and mutually beneficial manner,” the U.S. vice president said in a statement.
The talks in New Delhi, which followed a February meeting between Trump and Modi in Washington, coincided with a five-day trip to the United States by Indian Finance Nirmala Sitharaman for talks with U.S. business leaders and to participate in international conferences. During the trip, Sitharaman said she was hopeful that the first part of the trade pact would be concluded by the fall.
Risks and opportunities
The United States is India’s largest trading partner. According to U.S. government data, bilateral goods trade reached an estimated $129.2 billion last year, with a $45.7 billion surplus in favor of India — a 5.4% increase of $2.4 billion from 2023. This surplus has led Trump to label India a “tariff king.”
“The White House aims to convince New Delhi to lower nontariff and tariff barriers to increase U.S. exports to India,” said Kurt Tong, a former U.S. ambassador and managing partner at The Asia Group. It also seeks greater investment and integration with Indian companies on emerging technologies such as aerospace and biotechnology, he added.
As for India, experts say that its efforts to avoid tariff hikes are closely tied to a push for a trade deal with Washington.
“India no doubt hopes to combine tariff relief with this formal relationship,” Tong said. New Delhi, he added, is seeking a formal deal with the United States to solidify the economic relationship in legal terms and avoid future risk, all the while reassuring inbound investors.
At the same time, India is leveraging its geopolitical importance to its advantage in these negotiations, giving it a chance to strengthen its role as a key partner in the Indo-Pacific region — support that the U.S. is very keen on having amid its intensifying rivalry with China.
Trump’s so-called Liberation Day tariffs have put an unusual expediency on countries to negotiate swift deals, since the high tariff rates would produce a chilling effect on the ability of countries like India and Japan to export items to the United States.
Emily Benson, a trade expert and head of strategy at Minerva Technology Policy Advisors, says that Washington’s new approach also presents New Delhi with an opportunity to gain additional business from countries and companies moving supply chains out of China that could help it become a “powerhouse manufacturing base.”
Concluding a deal on the tariffs within the 90-day pause would produce greater certainty for India while signaling the political importance of the bilateral relationship, she added.
“India remains wary that it could remain exposed to a series of U.S. statecraft tools, ranging from sustained high tariff rates to security-based restrictions on trade and investment,” Benson said, adding that a swift conclusion to a trade deal would help ensure it is put on the fast track to greater growth and investment.
What is New Delhi offering?
India has also pledged to increase purchases of U.S. energy exports from $15 billion to $25 billion while signaling openness to future defense acquisitions, including F-35 fighter jets, said Misha Iqbal, South Asia analyst at U.S.-based geopolitics and intelligence firm RANE.
New Delhi has also offered to scrap its 6% digital advertising tax and has reduced tariffs on select U.S. exports such as bourbon whiskey, luxury cars and solar cells.
In addition, to help mitigate the risk of additional tariffs, India is likely to offer further concessions that may include boosting imports of U.S. goods, expanding market access for American firms in sectors like retail and telecommunications, strengthening intellectual property rights protections and lowering tariffs on additional U.S. products, Iqbal added.
“A similar strategy is being applied to other ongoing free trade agreements that India is pursuing,” he said. “While FTAs with countries like New Zealand, the United Kingdom and the European Union were previously paused, they have recently been revived amid U.S. tariff threats.”
This multipronged approach, the expert added, reflects the Modi government’s strategy of both avoiding tariff increases and securing favorable trade deals to strengthen its economic position.
But while India is keen to avoid straining ties with Washington, it could also face domestic political risks if it is seen as too accommodating to Trump.
A sensitive area
One particularly sensitive area is agriculture, where Iqbal believes Modi will likely resist making substantial concessions, and instead holding firm on protecting staple crops. The reason is that a surge in low-cost American produce arriving could undermine local agriculture and threaten rural livelihoods, prompting a backlash against Modi.
Whatever New Delhi’s ultimate solution to the U.S. tariffs issue may be, this formula might not necessarily apply to other nations that are closely watching how peers respond.
Although bilateral deals may eventually produce rough “blueprints,” each country’s unique economic relationship with the U.S. means the specifics of each response will “vary significantly,” according to Benson.
“While the tactics underpinning these negotiations may function similarly and provide insights for other forthcoming efforts, the specific goods, legal nuance and legal structure of each deal will be mostly unique.”
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