Modi-Trump talks: Five key takeaways

Despite the enthusiasm, Indian Prime Minister Narendra Modi’s second visit to Washington under Donald Trump’s subsequent expression was a calm, business-first affair- expected for a working visit, which lacks the pomp of a state visit.

Trump also announced increased oil and gas imports, including F-35 jet, and increased US military sales to India starting in 2025, in order to reduce the trade deficit. A new defense construction will be reached through a business agreement that will be reached by both parties.

He also confirmed the US had approved the extradition of Tahawwur Rana, a Chicago businessman accused of playing a role in the 2008 terror attack in Mumbai.

“That’s a lot of deliverables for an administration less than a month old,” Michael Kugelman of the Wilson Center’s South Asia Institute in Washington told the BBC

” General, both sides seem cozy continuing Biden-era cooperation, especially in technology and military, though many will be rebranded under Trump”.

Nevertheless, significant challenges lie away. Here are the essential restaurants:

Trump ordered that US trading partners to pay reciprocal tariffs- tit-for-tat transfer taxes to complement similar duties that those nations have now imposed on American exports. Modi’s visit came as a result of Trump’s visit. He directed experts to create broad-based, fresh tariffs for US business partners, warning that they might go into effect by April 1st.

India has a trade deficit with its main trading partner, the US. India cut average tariffs from 13 % to 11 % in its federal budget in a bid to pre-empt Trump’s tariff moves.

The verdict is still out on whether India appears to have escaped price upsets at this point.

Ajay Srivastava, founder of the Delhi-based think tank Global Trade Research Institute ( GTRI), says he doesn’t see any “problems with tariffs”.

The main reason, he says, is that 75 % of the US exports to India attract import taxes of less than 5 %.

” Trump points to extreme outlier tariffs like 150 % on select items, but that’s not the norm. India “has no reason to worry about reciprocal taxes,” according to Mr. Srivastava.

Abhijit Das, former mind of the Centre for WTO Research at the Indian Institute of Foreign Trade, isn’t convinced.

” The devil lies in the details. Mutual taxes didn’t really resemble India’s buy taxes; they will also take into account other variables, he told the BBC.

Trump’s approach could go beyond import duties, factoring in value added tax (VAT ), non-tariff barriers and trade restrictions. While India’s goods and services tax ( GST ) on imported goods aligns with WTO rules, Trump may still use it to justify higher tariffs.

A US government memo on reciprocal tariffs hints at this strategy, citing costs to American businesses from non-tariff barriers, subsidies and burdensome regulations abroad. It also cites VAT and government procurement restrictions as non-tariff barriers.

According to Mr. Das, the US is anticipated to drive for gaining access to India’s federal procurement market, which is already protected by WTO regulations.

” This likely hamper India’s ability to prioritise local suppliers, posing a primary concern to the’ Make in India ‘ action. This is undoubtedly never good news for us.”

Mr. Das suggests that India counteract Trump’s mutual tariff theory, particularly in agriculture, where strict non-tariff restrictions on Indian exports, such as rigorous maximum residue limits, are imposed.

He argues that since the US “heavily subsidises” its land business, India should identify these incentives to push up against American states.

Taxes alone may not be sufficient to bridge the two nations ‘ trade gap. According to experts, energy purchases and defense may contribute to reducing the gap.

The new$ 500bn ( £400bn ) trade goal aims to more than double the$ 190bn trade between the two countries in 2023.

By the end of the 2025 fall semester, Modi and Trump will begin to negotiate the initial phase of a business deal. Deals will concentrate on market exposure, price reductions, and supply chain integration across goods and services.

” The statement that the two parties will negotiate a deal deal gives India the opportunity to engage in trade negotiations for lower taxes on both sides. That would be a gift not only for the US-India marriage, but also for an American business that’s sputtered in recent months”, says Mr Kugelman.

What is unclear is what kind of deal agreement both parties intend to pursue.

” What is this business deal? Is it a fully developed free trade agreement or a “reciprocal tax agreement”? magic Mr Srivastava.

Mr. Das thinks that we’ll have to wait for more information about the business deal.

” It doesn’t always mean a free trade package- if that were the situation, it would have been stated directly. It might just include tariff reductions on a few products with common interest.

Priyanka Kishore, principal analyst at the Singapore-based advisory firm, Asia Decoded, says$ 500bn is a” large specific but there are low hanging fruit we can instantly abuse”.

“For instance the US sanctions on Russian shadow fleet are soon going to kick in, so India can easily pivot to the US for more oil. This will not be too difficult.”

Trump stated at the joint press conference that the US would ideally become India’s number one oil and gas supplier.

India’s defence trade with the US has surged from near zero to$ 20 billion, making the US its third-largest arms supplier.

While Russia remains India’s top source, its share has dropped from 62 % to 34 % ( 2017-2023 ) as India shifts toward US procurement.

Trump made a significant announcement to strengthen defense ties, saying that the US would increase sales of military equipment to India” by many billions of dollars starting this year,” opening the door for the F-35 stealth warplanes.

But this will be easier said than done, say experts.

” This sounds good, but it may be a case of putting the cart before the horse”, says Mr Kugelman.

He claims that bureaucratic constraints and export controls prevent the transfer of sensitive technologies despite rising US arms sales to India. The new defense framework that was announced at the summit may help address these issues.

Also India isn’t” taking the F-35 offer seriously” due to high maintenance demands, says strategic affairs expert Ajai Shukla.

Shukla points out that US arms deals have challenges because private companies place profits preceding long-term partnerships.

Yet with delays and cost overruns affecting some of India’s arms deals with Russia, Delhi’s defence ties with the US look set to deepen.

According to the Indian foreign ministry, Modi and Tesla CEO Elon Musk met to talk about AI and emerging technologies.

It’s unclear if they addressed Musk’s stalled plans for Starlink’s India launch or Tesla’s market entry.

Musk has pushed for direct spectrum allocation, clashing with Indian billionaire Mukesh Ambani, who favours auctions. His licence remains under review.

Tesla is also appealing to the Indian government to set up a factory, which will lower automakers ‘ import taxes by$ 500 million and local production by three years. Tesla has not yet made its plans known.

In a rare move, Modi and Trump both addressed two questions at a press conference, one relating to the allegations of bribery against the Adani Group and illegal immigration.

Gautam Adani, an Indian billionaire accused of having ties to Modi, was charged with fraud in the US last November in connection with an alleged$ 250 million bribery scheme.

Modi said he hadn’t discussed the issue with Trump. On immigration, he stated India was ready to take back verified illegal Indian migrants.

This was only Modi’s third direct press Q&amp, A in his almost 11-year tenure as India’s prime minister. He has never held a solo press conference. He answered all the questions in 2019 while sat next to Amit Shah, the party’s president, and in 2023 he only asked Joe Biden two questions.