India and the United States have faced considerable obstacles in their months-long talks for a bilateral trade agreement. These negotiations were first pledged to on Feb. 13, 2022. The talks are marred by endless crises and ominous undercurrents. These challenges highlight the challenge both nations face in deepening their bilateral economic relationship.
To push these negotiations along, the U.S. administration had set a so-called deadline, providing India “three Fridays” to wrap up the trade deal. India also waited until the last minute to arrange a phone call between Prime Minister Narendra Modi and President Donald Trump. This reluctance proved to be a major roadblock in the negotiations. This communication vacuum has produced a climate of anxious speculation about the fate of the trade deal.
In spite of these challenges, both countries have found themselves one step away from a final deal several times. Indeed, in the past year Prime Minister Modi and President Trump spoke eight times by phone. They held deep conversations around many issues that affect the breadth of their long-standing collaboration. These negotiations have not turned into a formal deal.
Jamieson Greer, of the U.S. Trade Representative, went so far as to say that India had placed the “best ever offer on the table” on these talks. The recent move by President Trump to impose 50% tariffs on Indian goods this past August only throws fuel on the fire. This tariff was accompanied by a heavy punishment meant to discourage India from importing oil from Russia. This decision has raised alarm bells about the future of their bilateral relationship.
In November, goods exports from India to the U.S. were up over 22% year-on-year. This increase happened despite tariffs already being in effect. This uptick is a welcome sign that Indian exporters are learning to pivot around the hurdles that tariffs create. The broader trade relationship is still on shaky ground because of continued inflammatory rhetoric about trade policy.
Agriculture, particularly the access that nations should give one another’s agricultural products, has become an important flashpoint in this year’s negotiations. The U.S. has been pushing for increased access to India’s highly protected farm sector. This diplomatic tension highlights deeper issues of food security and the interests of domestic agricultural constituencies in India.
The geopolitical landscape further complicates these discussions. And after the outbreak of the Ukraine war, India massively accelerated its buying of discounted Russian crude. In defending this decision, India highlighted its commitment to addressing the energy needs of its vast population, emphasizing that its energy security is paramount.
President Trump has recently threatened further increases in tariffs. This latest threat arises amid India’s continued purchase of Russian oil, adding more complexity to already contentious trade negotiations. For the first time, the U.S. government is applying serious pressure to this issue. This example highlights just how intertwined energy policy and trade relations are.
U.S. Commerce Secretary Howard Lutnick called Trump’s style of negotiation a “staircase” model. By proposing that each party only argue the immediate next step in negotiations, he argued that you can create a better outcome for both sides. Current developments indicate that this staircase may be particularly steep for India and the U.S. as they navigate these challenging waters.