Editorial: Indo-US trade deal imminent
US Vice President JD Vance’s visit to India helped in removing uncertainties surrounding the new tariff regime and cleared the way for finalising a trade agreement between the two countries
United States Vice President JD Vance’s four-day visit to India helped in removing certain apprehensions and uncertainties surrounding America’s new tariff regime and cleared the way for finalising a trade agreement between the two countries. The bonhomie that marked his meeting with Prime Minister Narendra Modi went beyond optics. During his interactions with the Indian side, the Vice President gave clear indications of an imminent bilateral trade agreement and spoke of deepening defence cooperation and the offer of the latest defence equipment, notably the F-35 fighter jet. He also made a strong case for exporting US hydrocarbons to India and partnering in energy exploration as well as emerging technologies, including artificial intelligence (AI). The two countries are keen to expand military cooperation as they have a convergence of views and shared strategic concerns, particularly in the Indo-Pacific region. Vance’s visit came amid a 90-day pause on tariff hikes declared by the Trump administration. The pause allows breathing room for major trading partners. For India, the stakes are very high. The bilateral trade reached $129 billion in 2024. Yet, the trade relationship has often been marred by mutual complaints and grievances. Washington labels New Delhi as a ‘tariff abuser’ while India laments US trade unpredictability and technology curbs. A fair and future-looking agreement could help clear these long-standing hurdles. India appears ready for an open and flexible approach to slash tariffs on over half of US imports.
The United States is India’s biggest export market. Indian exports to America totalled $87.4 billion in 2024. Pearls, electrical machinery and pharmaceutical products lead India’s export products. India also exports organic chemicals, textile articles, steel and apparel. The US trade deficit with India stands at $45.7 billion in 2024, in New Delhi’s favour. Even before the announcement of the reciprocal tariff by the US, India offered some concessions, slashing tariffs on luxury goods like bourbon and high-end motorcycle brands like Harley Davidson. But even with those cuts, current tariff rates remain very high — and much higher than the tariffs that Indian goods face in the US. India’s average tariff rate is 17 per cent compared with 3.3 per cent by the US, as per a report by the Indian Council for Research on International Economic Relations (ICRIER). The most striking difference is in the agriculture sector, where India’s tariffs are notably higher. This is done to safeguard farmers from imports that might otherwise flood domestic markets — nearly half of India’s population is dependent on farming. It is clear that the era of asymmetrical arrangements is over. Now, the encouraging feature is the widening scope of the India-US dialogue. Trade is now embedded in a larger matrix that includes defence, strategic technologies and regional stability. In a shifting geopolitical landscape, especially with US-China relations continuing to deteriorate, New Delhi emerges as a natural partner for Washington, not just economically but also strategically.
