India-US Trade Deal Faces Major Hurdles Amid Tariffs, Policy Clashes
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The prospect of a landmark India-US trade deal has hit significant roadblocks following recent tariff impositions and retaliatory measures. With an estimated $33 billion impact on Indian exports and potential digital taxes on US tech giants, negotiations face an uphill battle.
The Core Challenges⚖️
Former U.S. President Donald Trump's decision to impose tariffs on Indian goods has dramatically altered the negotiation landscape. India is reportedly considering reintroducing its digital tax on major U.S. tech companies—a move that could escalate tensions further.
Expert Perspectives💡
Avinash Gorakshkar, a SEBI-registered market expert, warns that India's potential $33 billion export loss may trigger reciprocal tariffs. Meanwhile, Utsav Verma of Choice Broking emphasizes that resolving structural differences requires permanent consultative mechanisms and sector-specific concessions.
Top 5 Roadblocks to the India-US Trade Deal🚧
Mutual Mistrust🤝
With over 90 WTO disputes since 1995 and the 2019 withdrawal of GSP benefits affecting $5.6 billion in Indian exports, trust remains fragile. While defense and tech cooperation has improved (U.S. FDI reached $8.3 billion in FY23), only 41% of Indian policymakers see U.S. trade policy as mutually beneficial.
Russian Crude Oil Imports⛽
Though not directly targeted by Trump's tariffs, threats of secondary sanctions on India's Russian oil trade create uncertainty. Indian refineries are already reducing imports, potentially leading to higher energy costs and inflation.
Unpredictable Negotiation Climate🎢
Frequent U.S. administration changes and renewed tariffs on steel (25%) and aluminum (10%) in 2025 have destabilized talks. The lack of a formal negotiation council makes progress erratic—trade policy uncertainty rose 32% for India-US compared to 18% for EU-US post-2022.
Access to India's Dairy and Agriculture Sector🐄
U.S. demands to open India's protected agricultural markets (average tariff: 39.5%) face resistance due to health, safety, and religious concerns. A NITI Aayog report suggests a 10% U.S. dairy market entry could reduce Indian prices by 17%, hurting small farmers.
Geopolitical Divergence🌍
India's $10 billion defense trade with Russia (including S-400 systems) contrasts with U.S. expectations. While US-India defense trade reached $20 billion in 2024, cooperation in digital sectors remains limited due to India's data sovereignty emphasis.
Outlook: Is There Still Hope?🔮
Despite these challenges, shared interests in Indo-Pacific security, climate resilience, and supply chain diversification could sustain engagement. However, success will require:
- A strategic reset in negotiation approaches🔄
- Stronger institutional collaboration mechanisms🏛️
- A balanced give-and-take approach from both nations⚖️
Bottom Line📌: While the path forward is fraught with challenges, the strategic importance of the India-US relationship means neither side can afford to walk away from the negotiating table entirely.
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