By Sanskriti Global Exports by Himanshu Gupta

The Grand Bargain Recalibrated: Navigating the New Chapter in India-US Trade Relations

Introduction

For years, the holy grail of the India-US economic relationship has been a comprehensive Free Trade Agreement (FTA). It represented a grand bargain, a powerful symbol of two of the world's largest democracies aligning their commercial destinies. However, as recent history shows, this ambition has been fraught with complexity. The headline-grabbing roadblocks of the Trump era, characterized by tariff escalations and the suspension of GSP benefits, seemed to push this dream further out of reach. Today, the noise of tariff threats has subsided, replaced by a more nuanced and pragmatic dialogue. But what does this new chapter of negotiations, defined by strategic frameworks like IPEF and targeted resolutions, truly mean for the Indian import-export professional on the ground? This analysis decodes the current state of play and outlines the tangible implications for your business.

Factual Summary: From Stalemate to Strategic Pivot

To understand where we are, we must acknowledge where we've been. The previous U.S. administration's approach was confrontational, leading to Section 232 tariffs on Indian steel and aluminum and, critically, the withdrawal of India's benefits under the Generalized System of Preferences (GSP) in 2019. This GSP withdrawal impacted nearly $6 billion worth of Indian exports, rendering them less competitive in the U.S. market. India, in turn, placed retaliatory tariffs on 28 U.S. products, including almonds, apples, and walnuts. This tit-for-tat dynamic effectively stalled any progress towards a broader trade deal.

The current U.S. administration has initiated a significant strategic pivot. The all-or-nothing pursuit of a comprehensive FTA has been shelved in favor of a more flexible, multi-pronged approach. This recalibration is built on two key pillars:

1. The Indo-Pacific Economic Framework for Prosperity (IPEF): Launched in 2022, IPEF is not a traditional FTA. It does not offer tariff reductions. Instead, it focuses on setting common standards and fostering cooperation across four pillars: Trade, Supply Chains, Clean Economy, and Fair Economy. India has strategically joined the latter three pillars, signaling its commitment to building resilient supply chains and collaborating on green technology. While its initial hesitation on the 'Trade' pillar highlights concerns over sensitive areas like labor and environmental standards, its active participation in other areas marks a deep engagement.
2. Revitalization of the Trade Policy Forum (TPF): The TPF has been re-energized as the primary bilateral mechanism for granular, issue-by-issue problem-solving. This forum has produced tangible results. In a major breakthrough, both nations recently agreed to terminate six outstanding disputes at the World Trade Organization (WTO). Furthermore, the TPF has facilitated crucial market access wins, such as the U.S. agreeing to import Indian mangoes and pomegranates and India allowing imports of U.S. pork and cherries. This demonstrates a clear shift towards building trust by resolving long-standing irritants.

While the mood is constructive, significant challenges remain. Key sticking points include U.S. concerns over India's intellectual property rights (IPR) regime, data localization requirements, and unpredictable tariff policies. Conversely, India continues to push for the restoration of its GSP status and seeks a 'totalization agreement' that would exempt Indian professionals working in the U.S. from double social security contributions.

Implications for Indian Import-Export Professionals

The shift from a single, high-stakes negotiation to a multi-track, incremental approach creates specific threats and opportunities. Here’s what you need to be watching:

For Exporters:

• Leverage IPEF's Supply Chain Pillar: The U.S. is actively seeking to 'de-risk' its supply chains away from China. This presents a golden opportunity for Indian manufacturers in sectors like pharmaceuticals (APIs), electronics, and critical minerals. Businesses that can demonstrate high standards of quality, reliability, and ESG (Environmental, Social, and Governance) compliance will be best positioned to integrate into these reconfigured, resilient supply chains.
• Monitor GSP Restoration Dialogue: While not imminent, the positive trajectory of talks keeps the hope for GSP restoration alive. Exporters in traditionally GSP-heavy sectors—such as jewelry, leather goods, textiles, and light engineering products—should have a dual-strategy financial model: one for the current tariff environment and one that can be quickly activated if GSP benefits are reinstated, allowing for aggressive pricing and market share capture.
• Capitalize on Agri-Export Openings: The recent market access granted for mangoes and pomegranates is not just a one-off win; it's a template. Agri-exporters should work closely with industry bodies and APEDA to understand and comply with U.S. sanitary and phytosanitary (SPS) standards to unlock further opportunities for other horticultural products.
• The Services Sector Advantage: The push for a totalization agreement is a game-changer for India's dominant IT and services sector. If signed, it could save Indian companies an estimated $1 billion annually, boosting the competitiveness of our tech talent and services exports to the U.S.

For Importers:

• Access to High-Tech and Capital Goods: A smoother trade relationship could streamline the import of advanced U.S. technology and capital goods crucial for India's 'Make in India' and PLI schemes. Importers in manufacturing, defense, and healthcare should anticipate a more favorable policy environment for critical technology transfers and equipment purchases.
• Navigating Medical Device Regulations: The U.S. continues to lobby for greater market access and pricing transparency for its medical devices. Importers in this sector must stay vigilant about potential changes to India's pricing control orders and regulatory frameworks, which could impact margins and product availability.
• New Opportunities in Food & Agriculture: The green light for U.S. pork, cherries, and alfalfa hay opens new product lines for Indian importers, distributors, and the hospitality industry. This allows for portfolio diversification but also necessitates an understanding of the cold chain and marketing requirements for these new product categories.

Conclusion: The Path Forward is Pragmatic

The narrative of the India-US trade deal has evolved from a binary 'will-they-or-won't-they' on an FTA to a more mature and complex story of strategic alignment. The current approach is less about a single, transformative pact and more about building a durable economic partnership through a series of deliberate, targeted agreements. For the Indian import-export professional, this new reality demands agility and a keen eye for sectoral opportunities. The path forward is not a superhighway; it's a series of carefully constructed bridges. Success will lie not in waiting for a grand announcement, but in capitalizing on the incremental wins and aligning business strategies with the clear direction of policy in Washington D.C. and New Delhi: towards deeper integration, resilient supply chains, and a rules-based economic order in the Indo-Pacific.

Source: Original