The terms of reference for the upcoming free trade agreement negotiations were finalized this month between India and the US. A comprehensive strategy is anticipated to guide the strategy, which will improve industry access, tariff reductions and non-tariff barriers, and establish a strong, integrated supply chain.  ,
Donald Trump’s” Liberation Day” tariffs on April 2 cannot be more confining for most nations, including India. The impact of Trump’s 26 % tax on India will not only negatively impact Indian exports, but it will also cast doubt on its ability to adapt rapidly to the fundamental realignment of global supply chains, which Trump’s punitive tariffs aim to necessarily change.  ,
The volume of taxes and counter-tariffs has been reduced to mere amounts as the situation evolves. Hope for a quick, US-China deal to end business disputes have almost vanished.
The 90-day delay on reciprocal taxes is a break for most countries, except for China, which is subject to a staggering 145 % income. In this ambiguous environment, no government would dare to make long-term plans. International trade is being rewritten in some ways in real-time.
Two recent events have suggested that Trump’s position has slightly cooled. He put a 90-day delay to the higher mutual tariffs on the targeted nations so they could deal with the US on April 11 and then put it on hold until China. He made the announcement on April 13 that tariff deductions for items like phones, computers, and other electronics are available in the US.
Additionally, tariffs on pharmaceuticals are a looming risk, which, if implemented, do have a near-doom effect on India’s economy. According to some estimates, India could be liable to lose about 30 % of its exports to the US alone.
India should not rejoice at the fact that China ( 145 % ), Vietnam ( 46 % ), Thailand ( 36 % ), Cambodia ( 49 % ), Indonesia ( 32 % ) and Bangladesh ( 37 % ) have been hit with higher impositions. However, India has trade opportunities and a lot of market space in the form of semiconductors and machinery, among others.
India should see the new fact being imposed by Trump as both a challenge and an option. In some ways, India is in a similar position to 1991, when the land was practically forced to open up due to diminishing foreign exchange reserves.
The new US tax regime and its battle with China offer an opportunity to reevaluate opportunities, discover weak points, and deal with its monetary policy demons.
Many Indians are unrealistically putting their hopes on a landmark Bilateral Trade Agreement ( BTA ) with the US to rescue this mess. India’s strategy to free trade agreements, while faced with an extremely mercantilist global trading system, will still be supported by its multi-vector international policy and its unwavering support for a multi-polar world.
India may now think betrayed by the US after what transpired following Prime Minister Narendra Modi’s attend to the US in February of this year, despite the absence of a public demonstration of dissention.
During his check-out,” Mission 500,” which aimed to double bilateral trade to US$ 500 billion by 2030, was discussed and discussed. In that regard, a determination was made to finalize the second stage of a mutually advantageous BTA by the fall of 2025.
Trump officially criticized India for being a “tariff prince” and a “big perpetrator” of trade relations just before announcing the new mutual tax government on April 2. This is in contrast to what he has been saying for a while.
India courted the US in the wake of that visit and the” Liberation Day” price announcement, signaling its commitment to US energy imports and serious defense talks with Washington.
India hastily eliminated the 6 % online advertising income and cut taxes on solar panels, luxury cars, bourbon whiskey, and a few other items in preparation for the BTA. Elon Musk’s Starlink was also suggested by India that it might be approved in India. Despite all those early concessions, India, like most other countries, continued to be subject to the reciprocal and baseline tariffs.
A trade agreement, in Trump’s opinion, is an instrument to improve self-reliance and shift the balance of trade. The US is currently pressuring India to open its politically sensitive agricultural and dairy sectors in trade negotiations.
The US and India also have a number of ticklish issues, including stringent approval standards for genetically modified products, strict licensing, and enforcement of intellectual property rights.  ,
India’s response has been more or less predictable. It will almost certainly not produce dairy and agricultural products, giving itself a bargaining chip for future negotiations. India will likely agree to increase the imports of US-made defense equipment and energy products to combat the negative trade balance.
In industries like pharmaceuticals and autos, where it already enjoys low costs and a strong manufacturing base, it might even consider 0 % tariff. Beyond this, it’s difficult to see India giving in to any more concessions.
However, India might face difficulties from rival nations that are also dealing with higher US tariffs, such as China, Vietnam, Thailand, and others. China has reacted by imposing similarly high counter-tariffs, but Vietnam has reacted by signaling it will drop all tariffs to 0 % in order to reach a trade agreement with the US.  ,
A senior Vietnamese official, who was recently on an official trip to the US, pledged to start negotiations for a free trade agreement and the purchase of US defense supplies. Additionally, he made an announcement about Vietnam’s intention to purchase$ 300 million worth of Boeing aircraft for its VietJet commercial airline. The US tariffs are undoubtedly bargaining chips.
India’s low dependence on exports of goods may seem advantageous in its negotiations with the US, but because of Vietnam’s precedent-setting commitment to 0 % tariffs on all US imports, India should be prepared for US expectations for a similar deal.
Given the length of these negotiations so far with the UK, EU, and US in particular, India should at best be cautiously optimistic about outcomes, especially given that ongoing trade talks with the US did not protect it from Trump’s high reciprocal tariffs.
As a general rule, an emerging market like India shouldn’t be concerned about a respectable trade deficit as long as it benefits from a BTA, boosts its exports, overall trade, and introduces new technologies and investments. However, India needs to be aware that a free trade agreement on its own won’t address India’s structural issues. It is entirely up to India to address them both at once.
Thus, India should take advantage of Trump’s tariff crisis as a unique opportunity to unilaterally lower global tariffs to increase competitiveness. This in turn will encourage the flow of superior foreign technologies, which will improve productivity and quality and boost national exports, especially those from emerging industries. Only then will India be able to take advantage of the opportunities Trump’s global supply chain disruptions offer.
Will India seize the opportunity, is the debatable question? Or will it once more go missing? How successfully India maneuvers the looming, negative effects of Trump’s tariffs depend not only on how quickly it negotiates a bilateral free trade agreement with the US, but also on how other nations bargain with the US over tariffs.
The key to a successful FTA with the US is to conclude, but the bigger question for India is how quickly it can increase its manufacturing capacity, adopt smart technologies, train skilled workers, construct modern logistical infrastructure, and pass progressive regulatory changes that can adapt to newly emerging global value chain alignments.
Only when global supply chains actually feed and integrate into Indian manufacturing can India count on being well-positioned to become a major global manufacturing and export hub in the upcoming years and ultimately a net-net Trump trade war winner.
Raghu Gururaj, an Indian Foreign Service officer, is a retired ambassador. He has his own opinions expressed here.