The News
Indian Prime Minister Narendra Modi and US Vice President JD Vance this week hailed “significant progress” in trade talks, as analysts said India may stand to benefit in Washington’s tariff war with China.
Modi is hoping to secure a deal with Washington before President Donald Trump’s 90-day pause on his “Liberation Day” tariffs — including a 27% levy on Indian goods — expires in July, and has already cut tariffs on some US goods to placate Trump.
Vance used a keynote speech in Jaipur to press for stronger ties, saying: “I really believe that the future of the 21st century is going to be determined by the strength of the United States-India partnership.”
SIGNALS
India has ‘golden opportunity’ to ramp up business with US
Donald Trump’s intensifying trade war with China offers India “a golden opportunity” to ramp up its business with the US, The Wall Street Journal noted, as it seeks to emulate China’s success in manufacturing. But “the idea of expanding American trade with India, while also isolating China, runs into a giant problem,” The Economist wrote: Many Indian exports to the US — including smartphones — rely on Chinese components, and a wholesale decoupling of India and China “is neither feasible nor desirable,” The Hindu argued. Meanwhile, Indian manufacturing continues to be held back by “big old Indian obstacles,” including a slow court system, notorious levels of red tape, and a lack of available financing, The New York Times wrote.
Export-shy India is largely shielded from global trade war
India’s large domestic economy and relatively low exposure to the US “have seen it emerge as something of a safe haven in the developing global trade war,” Bloomberg noted: The value of Indian M&A deals is up more than 20% this year. “Being trade-shy has turned into an advantage,” a Mumbai-based analyst told the BBC: The export of goods accounts for just 12% of India’s GDP, according to Morgan Stanley. Still, Trump’s trade war has prompted a shift in New Delhi’s traditionally cautious approach toward foreign trade: “Global uncertainty” surrounding US trade policy is driving India to strike deals with other countries, its finance minister said.
India’s protectionist instincts could complicate US trade deal
Washington’s demand for greater access to India’s closely guarded markets could still derail the current trade talks. Indian leader Narendra Modi “faces fierce resistance from domestically protected sectors such as agriculture and automobiles,” three analysts wrote, while his nationalist-leaning government could face backlash if it “bends over backward to appease Washington,” Foreign Policy noted. As the Trump administration seeks to persuade India to give US retailers full access to its e-commerce market, a lawmaker for Modi’s ruling party told the Financial Times that foreign investment “must not come at the cost of distorting India’s retail ecosystem.” Some 44% of India’s population is employed in agriculture, many of them smallholder farmers who could be hit hard by a wave of US agricultural products. Modi’s challenge will be to offer “just enough to keep Washington at the table while safeguarding its rural backbone,” the BBC wrote.