fazTimes media: New Delhi/Washington— There could be a big change in the trade relationship between India and the US, as former US President Donald Trump suggested that talks for a long-awaited interim trade deal are reaching the last stage. Though the full details are not yet known, if the deal is finalized, it might change how American companies can enter Indian markets and reduce some of the trade tensions between the two major democracies. This week, in Washington, Trump told reporters that the US will have “access to India” and compared the planned agreement to a recent trade deal with Indonesia.

“We made a deal with Indonesia. We have full access to Indonesia. India is working along that same line,” he said, according to PTI. Though the agreement hasn't been officially announced, many believe it will help American businesses sell more products in India, especially in areas like agriculture, dairy, energy, and manufacturing.

The deal is called an “interim agreement,” which is a smaller and easier-to-manage version of a full free trade agreement (FTA).

India and the United States have had a trade relationship that has been both good and bad. On the positive side, their trade has been growing, and in 2022, the total trade between the two countries reached more than $128 billion, according to the US Trade Representative's Office. However, recently, both countries have started to charge higher taxes on each other's goods, which has caused some tension in their relationship.

India lost its special trade benefits under the US Generalized System of Preferences (GSP) in 2019. These benefits permitted the sale of certain Indian products in the US without incurring additional taxes. As a result, India started charging more taxes on American goods like almonds, walnuts, and apples. Things got even worse in 2020 when the Trump administration imposed high tariffs on Indian steel and aluminum, raising the costs by 50% and 25%, respectively. Now, it looks like the two countries are getting closer to a new trade agreement.

Experts think the outcome could be a fresh start for their trade relationship.

“With increasing protectionism and uncertain economic conditions around the world, this agreement would help build trust among investors and strengthen the strategic bond between India and the United States,” said Dr. Ritu Kapoor, an international trade expert based in New Delhi.

Indian Caution: No Rush on Deals.

Even though Trump is hopeful, India is still being careful. The Commerce and Industry Minister, Piyush Goyal, said earlier this month that New Delhi won’t sign any agreement too quickly if it doesn’t fully help the country’s economy and interests. He said, “We are not working with a deadline. India will only agree to a trade deal when it is in our national interest and all necessary preparations are complete,” he stated during a press meeting.

Right now, an Indian group from the commerce ministry is in Washington, meeting with top officials to fix the main issues. One of the big topics is the US asking for lower import taxes on agricultural and dairy products—a subject that's crucial for India, because the country’s farming industry is huge and very sensitive.

India has always refused to lower tariffs on dairy products for any country in a free trade deal. The reason is that dairy is crucial for local jobs and also has religious significance in India. As reported by The Hindu Business Line, India has never given any duty breaks on dairy to another country in a trade agreement.

On the other hand, India is asking the US to remove the tariffs it has placed on Indian steel and aluminum, and it also wants lower tariffs in the automotive industry. These areas are where India sees big chances for growth.

In his second run for president, Donald Trump is still using trade policies as a key part of his strategy. He announced new tariffs on April 2, targeting several countries, including India, unless they quickly resolve trade issues.

Trump's trade strategy is based on what he calls "reciprocity. India could have taken trade talks with the U.S. more seriously as a result. With more global competition and supply chain problems caused by the pandemic and ongoing conflicts in Ukraine and the Middle East, countries are trying to find dependable trade partners. In this situation, India and the U.S. both want to reduce trade tensions.

What’s on the Table?

Even though the final details of the deal aren’t clear yet, here are the main topics likely to be discussed:

Agricultural Access: The US wants to sell more agricultural and dairy products to India.
India is being careful but might allow some limited product entries or processed goods.
Industrial Tariff Reductions: India is asking the US to reduce or remove tariffs on its steel, aluminum, and car exports.
Digital Trade and E-commerce: Both countries may discuss regulations regarding digital payments, data storage, and the sharing of digital services across borders.
Pharmaceuticals and Medical Devices: India wants the US to make it easier to get regulatory approvals for its medicines and medical equipment. The US, on the other hand, wants more transparency in how India sets prices for these products.
Energy Exports: The US is likely encouraging India to purchase more LNG and other energy products from American suppliers.

Voices From the Ground

Indian exporters and industry groups are closely monitoring the developments. The Federation of Indian Export Organisations (FIEO) responded with some caution. “If this temporary agreement results in lower tariffs and more certainty, it would be very good for our exporters, especially small and medium-sized businesses,” said S. K. Singh, the FIEO vice-president.

At the same time, Indian companies based in the US are looking for better connections between the two countries. “We hope the agreement includes things like simpler business visa rules and more sharing of technology. That would make a big difference,” said Anjali Mehta, an entrepreneur based in Silicon Valley.

A Win-Win Deal?

The possible trade deal happens at a key political moment for both countries. India is preparing for important state elections, and the US is in the final stage of its 2024 presidential campaign. A carefully planned trade agreement could help improve economic chances for both nations and also act as a way to counter China's growing influence in the region.

BBC News says trade experts think this agreement could be the start of something bigger. It might lead to a full free trade deal in the future. However, there are still some difficulties.

The people talking about the deal need to consider political feelings, economic goals, and strategic plans. If everything goes well, this temporary trade agreement between India and the US could be a big step forward in what many consider the most important relationship between the two countries in the 21st century.

azTimes will continue to follow what happens in Washington and New Delhi. Stay tuned for detailed reports, expert talks, and special insights as the trade discussions continue.

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