Trump Modi (La Presse)

New US-India Trade Deal In The Works

The Phase One trade deal with China has been sealed. The United States-Mexico-Canada Agreement done and the Trump Administration’s Middle East Peace Plan unveiled. What’s next for the US President and his art of the deal? Perhaps he would have liked that answer to be Iranthe Islamic Republic has proved to be more stubborn. 

Back To The Economy

But the master deal maker has no plans to stop and he is setting his sights once again on economic matters. If Tehran won’t be the current focus of policy, then somewhere else is in the cards and from the looks of it that seems to be New Delhi. Although the trade war with China dominated most of the headlines given the volume and values, another country that had been caught in the fire of US tariffs was India. 

Like China, India too has been running trade surpluses with the US for years, though of much lower magnitude. In 2018-19, New Delhi exported goods worth $52.4 billion to the United States while importing only $35.55 billion, giving New Delhi a trade surplus of $16.86 billion. 

Trump’s Trade Troubles With India

In Trump’s binary theory of international trade where deficit is a defeat and surplus is a win, it comes as no surprise that he wants to change this setting. Hence, the US President first unleashed his wrath on India in March 2018 with the imposition of 25% and 10% tariffs on $761 million and $382 million steel and aluminum imports, respectively. These make up 2.3% of the country’s exports to the United States. 

Making matters worse for New Delhi, Trump followed his tariffs with something even worse the next year: renunciation of India’s Generalised System of Preference (GSP) status, which for over four decades had allowed India preferential access to the US market. As a result, some of the exemptions from 2018 tariffs available to India were no longer applicable, which meant that 12% of its exports were now impacted by the trade war.

This made India retaliate by imposing tariffs on $1.3 billion of goods, primarily fruits and nuts, which made up 5.5% of US exports to India in 2017. It also took the matter to the World Trade Organisation for dispute resolution. As this drama unfolded, the two sides took to the negotiating table to find common ground. Talks were held in July 2019 but failed to make any progress, and again when Indian leader Narendra Modi visited the US but to no avail. 

India-US Discussions Are Now Back On

However, the discussions seemed to have picked up pace lately, beginning with the mini-trade deal in September and now United States Trade Representative Robert Lighthizer is set to visit New Delhi in the beginning of February to finalize all the nitty-gritty of the upcoming agreement, which will reportedly be signed when Trump tours India later that month. 

The deal is reportedly worth $10 billion and like the one with China, the US is trying to get India buy more of its goods. Just less than two weeks ago, Reuters reported that Washington has asked New Delhi to boost its imports of American farm goods by at least $5-6 billion in order to get back in place the GSP concessions or obtain a wider pact. 

More Areas To Work Out: E-Commerce And Tech

Another major concern Washington has had is over market access and any pact will be sure to address that, especially with regards to e-commerce and tech where India’s regulation is particularly harsh on American giants such as the likes of Walmart and Facebook. 

Meanwhile, from India’s side, the focus is going to be on preferential access beyond the GSP-covered sectors as well, so its exports to the USwhich already make up the largest share at 15%can be further pushed up to help its ailing economy.