By Sanskriti Global Exports by Himanshu Gupta
Decoding the Deal: Trump’s Trade Talk and What It Means for India's Exporters
In the high-stakes theatre of international relations, especially during a US election year, words are often wielded as both weapons and promises. The recent comments by former US President Donald Trump, suggesting a major trade deal with India is on the horizon, are a perfect example. Speaking at a rally, Mr. Trump not only declared his intention to secure a deal but also made the rather extraordinary claim that he previously used the threat of 250% tariffs to de-escalate a potential conflict between India and Pakistan. For the Indian import-export community, such pronouncements are more than just political noise; they are potential precursors to significant policy shifts that could reshape market dynamics.
As a seasoned analyst advising India's trade professionals, my role is to cut through the campaign rhetoric and provide a clear-eyed assessment. Is a groundbreaking deal imminent? Or is this a return to the transactional, high-pressure tactics that defined his first term? Let's dissect the statement and explore the tangible implications for your business.
The Factual Landscape: Separating Campaign Rhetoric from Policy Reality
To understand the potential future, we must first accurately recall the past. Mr. Trump's statement accomplishes two things from his perspective: it positions him as a master dealmaker and a decisive foreign policy leader. His claim of single-handedly preventing a conflict with tariff threats is, it must be said, unverified and fits a pattern of bold, self-aggrandizing assertions. It should be viewed primarily through the lens of electioneering, designed to appeal to his domestic base.
However, dismissing his words entirely would be a mistake. His first term saw a fundamental shift in US trade policy, moving away from multilateral frameworks towards aggressive bilateral negotiations. For India, this resulted in the revocation of its benefits under the Generalized System of Preferences (GSP) in 2019, which had provided tariff-free access for nearly $6 billion worth of Indian exports. Negotiations for a limited trade deal repeatedly stalled over key issues, including market access for US dairy and agricultural products, price caps on medical devices in India, and digital trade policies.
This history provides crucial context. A potential second Trump administration would likely pick up where the first left off: with a laser focus on the bilateral trade deficit, a willingness to use tariffs as leverage, and a transactional approach where every concession from India would be met with a demand for a counter-concession from the US. This stands in contrast to the current Biden administration's approach, which, while still firm on trade, has prioritized strategic partnerships like the Indo-Pacific Economic Framework (IPEF) and resolving longstanding WTO disputes, indicating a more collaborative, if slower, process.
Implications for the Indian Import-Export Sector
For Indian business leaders, preparing for potential policy shifts is not a matter of prediction, but of prudence. A return of the Trump administration could bring both challenges and, potentially, opportunities. Here are the key implications to consider:
- A Return to Volatility and Unpredictability: The primary characteristic of trade policy under the previous Trump administration was its unpredictability. Policy could be announced via social media, and tariff threats could emerge with little warning. Businesses, particularly those in sectors like steel, aluminum, and engineering goods, must brace for a less stable policy environment. Supply chain resilience and market diversification will become even more critical.
- Renewed Focus on the Trade Deficit: Mr. Trump is famously focused on bilateral trade balances. India's trade surplus with the US, which stood at over $36 billion in 2023, would once again become a major point of contention. Sectors that are major contributors to this surplus—such as gems and jewellery, pharmaceuticals, textiles, and machinery—can expect to come under intense scrutiny and pressure.
- The GSP Question as a Bargaining Chip: The potential restoration of GSP benefits would be a significant carrot dangled by a Trump administration. However, it would not be a gift. It would be a key bargaining chip, likely demanding substantial concessions from India in sensitive areas. Exporters who previously benefited from GSP should be cautious about banking on its immediate return without significant trade-offs, possibly including stricter IPR enforcement and greater market access for US tech and agricultural firms.
- Scrutiny of 'Make in India' and PLI Schemes: India's push for self-reliance through initiatives like the 'Make in India' campaign and the Production-Linked Incentive (PLI) schemes could be viewed by a Trump administration as protectionist and constituting unfair subsidies. This could lead to countervailing duties or other punitive measures, creating challenges for manufacturers aiming to make India a global export hub with government support.
- Transactional Geopolitics: While the strategic convergence against China will remain, the approach will differ. A Trump administration is more likely to frame the partnership in purely transactional terms. This could mean demands for India to purchase more US defence equipment or energy in exchange for favourable trade terms. The broader, values-based partnership narrative might take a backseat to hard-nosed, quantifiable deal-making.
Conclusion: Prepare for Turbulence, Focus on Fundamentals
Donald Trump's pronouncement serves as a stark reminder that the US political landscape is a key variable in India's global trade equation. While a comprehensive trade deal has long been the goal, the path to achieving it could become significantly more transactional and turbulent.
For India's import-export professionals, the message is not to panic, but to prepare. The coming months will be filled with political rhetoric. The prudent course of action is to focus on business fundamentals: strengthening supply chains, diversifying export markets beyond the US where possible, enhancing competitiveness, and staying agile. Whether a deal materializes or not, the underlying dynamics of the US-India trade relationship are set for a period of potential reassessment. Those who are prepared for volatility, rather than just hoping for stability, will be best positioned to navigate the challenges and seize the opportunities that lie ahead.
Source: Original