India recently concluded a free trade agreement with the European Union, which may have influenced the United States to advance its trade negotiations with India. Farwa Aamer, a South Asia expert at the Asia Society, noted that the timing of the US-India trade deal following the EU agreement is significant. The trade agreement between Prime Minister Narendra Modi and US President Donald Trump includes a reduction in tariffs on Indian exports from 25% to 18%.
This breakthrough in trade relations between India and the US came after approximately a year of negotiations, marked by some challenges. Aamer highlighted the importance of maintaining stable relations for India, particularly concerning its oil imports from Russia. The trade deal was finalized after a discussion between PM Modi and President Trump, emphasizing the critical role of leadership-level engagement in reaching the agreement.
Wendy Cutler, a trade expert, pointed out that the US-India trade deal could provide India with a competitive edge over its Southeast Asian counterparts. She mentioned that the reciprocal tariff for Indian exports to the US will be reduced to 18%, giving Indian exporters an advantage over ASEAN competitors facing higher tariffs. Cutler suggested that the US likely secured more favorable terms compared to the EU in the trade agreement with India.
The agreement between India and the US is expected to facilitate cooperation on various strategic issues, including critical minerals, technology collaboration, and supply chain resilience. Cutler emphasized that the trade deal will pave the way for enhanced bilateral engagement between the two countries on crucial matters. The visit of External Affairs Minister S Jaishankar to the US for the Critical Minerals Ministerial further underscores the importance of strengthening ties between India and the US.
