A year after expressing his inability to attend the Republic Day parade in the Indian capital, the US President Donald Trump will be visiting India in February to sign a short term trade deal, paving the way for a longer-term agreement on a later date. Officials from New Delhi and Washington are working out mutually convenient times for the US President Donald Trump’s visit to India.
According to trade observers, Trump wants to counterbalance China with India, which has a considerable market and offers high potentials for US investors. The US, which is a prominent supplier of arms to India, is keen to have greater access to the vast Indian consumer market. The trade agreement with India will be an essential achievement of the Trump administration with the US President seeking a second term in November. With the Modi government, struggling with a slowing Indian economy and keen to attract investment to revive it, a trade package with the US. would facilitate better market access to both countries.
During Prime Minister Narendra Modi’s visit to the United States (US) in September 2019, President Donald Trump had made an appearance at the “Howdy Modi” event in Houston, and a trade deal was expected to be announced by the two leaders. But, the two sides differed on some issues before that landmark trip ended. The two sides have been in talks to resolve trade differences, and Trump’s visit could pave the way for an ambitious Free Trade Agreement.
Why the relationship soured
The deal will help to expand India’s exports, especially if the Generalised System of Preferences (GSP) is revoked. Tensions over trade tariffs surfaced last year when the Trump administration hiked tariffs on imports of steel and aluminum from several countries, including India. Then, in May 2019, Trump abolished the trade privileges under the US Generalized System of Preferences program, claiming India is not allowing “equitable and reasonable market access” to American goods. India struck back two weeks later, hiking tariffs on 28 items imported from the US worth around USD 220 million.
It may be recalled that since India opened up its economy in 1991, the US-India bilateral trade has grown at a spectacular rate. India- US bilateral trade has increased significantly in the last decade, and it touched approximately USD 160 billion in 2019. The US is also a prominent investor and a significant source of FDI. If the trade deal is concluded, then an investment deal can follow. Mike Pompeo, the United States Secretary of State on a short visit to New Delhi in 2019, said American investments worth trillions of dollars are waiting to be invested in India. Trump followed that up in Osaka by promising India “huge things… in terms of manufacturing, in terms of trade,”- without providing details. India needs to increase employment which only manufacturing can provide, and an increase in exports is a must for it.
The United States and India consider one another as critical strategic partners to advance common interests regionally and globally. The two nations are keen to transform the long friendship between two of the largest free and open democracies into a global strategic partnership. With India’s growing integration in the worldwide economy, the deal is likely to be a win-win position for both the nations, with India getting access to markets where China was the dominant player.