Influential figure P Chidambaram labels India's economic situation as dominated by a belligerent bull
In the global economic landscape, the trade negotiations between India and the United States under President Donald Trump's protectionist policies have taken a complex turn. The discussions, initiated in March 2025, aim to expand trade but face significant hurdles, particularly regarding US demands for greater access to India's agriculture and dairy sectors.
India, once a staunch advocate of protectionism, has undergone a transformation since the 1990s. Embracing economic reforms, the country focused on trade policy reforms, industrial policy reforms, and fiscal discipline. This shift was necessitated by the need to integrate with the global economy and boost exports.
However, the US under Trump has turned 'protectionist', imposing tariffs on various countries, including India. Initially, India was given a 90-day reprieve with a 10% baseline tariff, but higher tariffs were imposed after this period ended in August 2025. These tariffs have put additional strain on the negotiations, with Indian officials indicating a need to safeguard national interests amid these protectionist measures.
Trump is unapologetically in favour of high tariffs, opaque non-tariff measures, discouraging imports, and balanced trade with every country. He has used tariffs as a tool to reward countries that have yielded to his demands and to punish those that have resisted.
Despite these tensions, Indian Prime Minister Narendra Modi and Trump agreed earlier in the year to increase bilateral trade to $500 billion by 2030, signalling a long-term aspiration to deepen economic ties. However, recent negotiations have stumbled, most notably over tariffs affecting agriculture and automotive sectors, causing the potential trade deal to stall or fall through as of mid-2025.
As the negotiations continue, India is considering offering incentives for exporters, adjusting the exchange rate to compensate exporters, and temporarily curbing unnecessary imports. The country must expand its range of export products, seek new markets, and liberalize foreign direct investment rules.
In the face of these challenges, India must stand firm, defend its interests, be open to fair trade, and be ready to negotiate and conclude agreements, despite the potential difficulties. The complexities of modern technology and the need for various skills make it difficult for a single manufacturer to design and produce all necessary sub-assemblies and components. Therefore, India, like several other countries, must look beyond its borders to forge strong trade relationships and build a robust export-oriented manufacturing sector.
References: [1] The Economic Times, "India-US trade talks hit hurdles over agriculture, automotive sectors," 15 June 2025. [2] Bloomberg, "US-India Trade Deal Stalls Amid Disagreements over Agriculture, Auto Sectors," 1 July 2025. [3] Reuters, "US-India trade deal in question as talks stall over agriculture, auto sectors," 15 August 2025. [4] Financial Express, "India to take necessary measures in response to US tariffs: Government," 20 August 2025.
- Amidst the tense India-US trade negotiations, India is contemplating offering incentives for exporters, readjusting the exchange rate to protect exporters, and temporarily restricting non-essential imports.
- The global finance market has been observing the unfolding events in the India-US trade talks, with particular focus on tariffs affecting agriculture and automotive sectors.
- With Indian officials stressed about safeguarding national interests amid US protectionist measures, investment in the Indian stock market may be affected, especially in sectors hit by tariffs.
- As technology continues to play an increasingly significant role in lifestyle, the ongoing trade tensions between India and the US could potentially impact the growth of decentralized finance (DeFi) in India, which has shown great promise in recent years.
