Nifty surged on hopes of less hawkish Trump tariffs on India

·       The US Treasury Secretary said the US is preferring India, Japan, South Korea, Japan and Vietnam in trade deal talks as they have already approached

·       The US contributes almost $55 billion in trade and $32 billion in remittances to India; thus India has to keep Trump in a good mood at least till November ’26 midterm election

·       India has to cut tariffs and GST in line with the Trump admin’s preference; lower tariffs may affect Indian producers in the short term but may be good for the economy

·       India is trying to leverage China's strategic factor and Modi’s friendship with Trump in trade talks with the US to get concessions, but it may not be so easy  

India’s benchmark stock index Nifty recovered almost 2% from the recent low around 22350 after US President Trump postponed his reciprocal ad-valorem tariffs of 10% to 40% on all countries including India except China for 90 days to July 9, 2025. For India, Trump’s ‘discounted’ reciprocal tariff rate was 26% against alleged tariffs of 52% being imposed by India on American goods on average. This includes the Trump administration’s perceived notion of average tariffs and non-tariff trading barriers including India’s GSTs and other local sales taxes.

The US will now apply a 10% universal basic tariff on almost all major countries/trading partners including India except China. Trump tariffs and counter/retaliatory tariffs are now 145% (on Chinese goods imposed by the US) and 125% (on US goods imposed by China). On April 11, 2025, the Trump admin exempted various electronic items including Smartphones, computers, semiconductors, solar cells, flat panel TV displays, flash drives, memory cards, and solid-state drives from Trump's reciprocal tariffs. But Trump will maintain a 20% Fentanyl tariff on China on these electronic items.

Potential Economic Effects of Trump's Reciprocal Tariffs on India

Now, talking about India, Trump's reciprocal tariffs, announced to address perceived trade imbalances and inequalities, impose a 26% import duty on Indian merchandise goods to America, which may be applicable from July 9, 2025, if negotiation fails. The US universal basic tariff of 10% is now applicable on all Indian merchandise goods except the above electronic items starting April 5, 2025. Trump tariffs charge India’s $87 billion goods exports to the US at 10% vs earlier 2.5% on average. The US is India’s biggest exporting client. India has a trade surplus of around $37 billion, the highest among all trading partners.

Although India is not an export-heavy economy like China, Vietnam, Mexico, Japan and South Korea, India needs the US export revenue and also remittances for its FX/USD reserve. Thus it’s paramount for India to maintain good relations on trade and diplomacy. India’s trade deficit with China is around $80 billion vs $56 billion trade surplus with the US. China is a vital supply chain for India’s economy, like the US.

The US is India’s top export market and trading partner of India (goods + services)

Top three Export Markets and trading partners for India (Goods & Services) for 2024

1) United States (US): Total Exports ~$122.4 billion 

·       Goods Exports: $87.4 billion (electronics, gems and jewelry, pharmaceuticals, textiles, chemicals)

·       Gods Imports: $40.8 billion (petroleum, aircraft, machinery)    

·       Services Exports: $35 billion (IT, BPO, telemedicine, financial services)

·       Service Imports: $25.9 billion (financial services, IP licensing)

·       Trade Surplus $55.7 billion 

·       Largest market for Indian goods & service export

2) United Arab Emirates (UAE): Total Exports ~$41.6 billion 

·       Goods Exports: $31.6 billion (gems, petroleum products, textiles)

·       Goods Imports: $52 billion (crude oil, gold) 

·       Services: Exports:$10 billion (IT, professional services, manpower)

·       Service Imports: $5 billion (logistics, financial services)

·       Trade Deficit -$15.4 billion

·       UAE is a Key oil supplier and re-export hub (refining petroleum products)

·       Services trade growing under CEPA, with a focus on IT and manpower exports

3) China: Total Exports $33.5 billion

·       Goods Exports: $16.7 billion (iron ore, cotton, spices, marine products)

·       Goods Imports: $101.7 billion (electronics, machinery, organic chemicals/pharma APIs, plastics, Fertilizers, textiles & apparel)-consumer and industrial goods/raw materials/parts

·       Services Export: $10 billion (IT)

·       Service imports: $5 billion (consulting)

·       Trade deficit: $80 billion

·       China is the vital supply chain for India

·       China is the 2nd largest trading partner for India after the US

Nature of India’s Goods Exports to the US in 2024: Total export ~$87.4 billion, almost 20% of India’s total goods export ~$441.4 billion

·       Engineering goods (~20%, $17.6 billion-machinery, auto components)

·       Gems and Jewelry (~11%, $9.9 billion-polished diamonds)

·       Pharmaceuticals (~10%, $8.72 billion-generics medicines, biologics)

·       Electronic goods (~11%, $10 billion-Apple smartphones, telecom equipment)

·       Petroleum products (~7%, $5.83 billion-refined petroleum products)

·       Textiles and apparel (~5%, $4.71 billion-cotton garments)

Nature of India’s Goods Imports from the US in 2024: ~$41.8 billion, 3rd largest after China and UAE

·       Fossil/Mineral fuels (~32%, $12.9 billion-LNG, light crude oil)

·       Precious stones (~13%, $5.16 billion diamonds, golds for re-export)

·       Machinery (~9%, $3.75 billion-industrial equipment). 

·       Electrical machinery (~7%, $2.85 billion-electronics, chip-making tool) 

·       Aircraft and parts (~5%, $2 billion-Boeing components)

·       Imports include 5,749 commodities, with fuels and tech goods prominent

Nature of India’s Services Exports to the US for 2024: ~$35 billion, almost 9.5% of India’s total service exports ~372.3 billion

·       Information Technology (IT) and IT-Enabled Services (ITeS): (~70%, $24.5 billion- Software service, development, cloud computing, AI solutions for big US techs like Microsoft, Google

·       Business Process Outsourcing (BPO): ~15%, $5.25 billion-Customer support, HR, back-office operations

·       Financial Services: ~8%, $2.8 billion-Fintech, actuarial services

·       Telemedicine and Healthcare: ~5%, $1.75 billion-Remote diagnostics, medical IT support

·       Education: ~2%, $0.7 billion-E-learning platforms, academic partnerships

·       The U.S. absorbs ~60% of India’s IT exports

·       Indian firms like TCS and Infosys employ over 150,000 in the US

Nature of India’s Services Imports from the US for 2024: ~$27.7 billion

·       Financial Services: ~30%, $8.3 billion- BFSI-Banking, insurance-e.g., Goldman Sachs, AIG, Citi Bank

·       Travel and Tourism: ~25%, $6.9 billion- U.S. tourists, business travel 

·       Intellectual Property: (~20%, $5.5 billion): Software licenses, R&D collaboration. 

·       Business Services: ~15%, $4.2 billion)- Consulting-McKinsey, Deloitte, E&Y

·       Transportation: ~10%, $2.8 billion- Logistics, aviation services

Points to be noted

·       India’s exports of pharma and gems have a cost-competitive advantage

·       Indian exports of electronics and smartphones are growing due to China + one factor  

·       U.S. imports focus on fuels and capital goods, with LNG imports rising due to energy deals

·       India’s cheaper IT export dominates due to growing digital demand (cloud, AI)

·       U.S. services imports (travel, finance) are also substantial

·       No formal India-U.S. FTA/BTA exists, but current trade talks aim to avoid reciprocal tariffs

·       India’s tariff cuts (e.g., motorcycles of Harley-Davidson, burden whiskey) signal openness, while H-1B visa restrictions remain a services trade hurdle

·       The US is India’s 3rd largest FDI source (~$68 billion from 2000-2024)

·       Indian firms invest $40 billion in the U.S., creating 400,000+ jobs (e.g., TCS Infosys)

Trump tariffs Challenges: 

·       Potential reciprocal tariffs could hit Indian textiles and pharma,

·       India’s high tariffs of around 14..5% weighted average rate vs 2.5% US tariff is worrisome

·       Electronics, gems and jewelry, chemicals, textiles, and auto parts face significant exposure due to high U.S. demand.

·       A 26% Trump tariff could reduce competitiveness and demand, with estimates suggesting a $5.76–$33 billion drop in India’s exports  by around 0.5% if applied at face value (0.2–0.9% of GDP)

·       Although, at present Pharmaceuticals and semiconductors are spared, offering relief to India’s generic drug industry, which supplies nearly half of U.S. generics, Trump promised prohibitory tariffs for both sectors in the coming days.

·       Lower US tariffs on India (26%) compared to China (145%), Vietnam (49%), or Bangladesh (38%) could shift supply chains, boosting textiles, apparel, and electronics if India capitalizes on production incentives.

·       The US H-1B caps limit Indian IT onsite delivery

·       Vietnam and Mexico challenge India’s electronics exports

Effect of Trump’s higher reciprocal tariffs on Indian economy, macro and policy

·       Effect on inflation or cost of living would be almost neutral considering higher USDINR, higher imported inflation, and lower tariffs

·       Estimates vary from a negligible 0.01% GDP gain (no retaliation scenario) to a 0.5% growth reduction as India is not an export-oriented economy; potential higher government spending may help despite subdued domestic consumption

·       India’s $55 billion trade surplus with the U.S. may narrow if exports fall, though diversification and service exports could offset losses, there would be intense competition as almost all other major exporters including China will also try to expand their exports instead of the US

·       Foreign direct investment (FDI) and also Foreign Portfolio Investments (FPI) may face risks if trade tensions persist

·       Higher tariffs on China and Vietnam (at present face value) position India as an alternative for textiles, electronics, and manufacturing, provided India’s manufacturing and logistical infrastructure improves along with overall policy reform for lower input costs, and ease of doing business in India (deregulations)

·       A tit-for-tat escalation like from China could worsen global trade, though India has avoided immediate countermeasures to focus on negotiations

Indian Steps and Bilateral Trade Agreement Negotiations To Avoid An All-Out Trade War with the US

India is proactively addressing the tariffs through strategic measures and negotiations to secure a bilateral trade agreement (BTA) with the U.S., targeting completion of the first phase by late 2025. India and the U.S. agreed in February 2025 to finalize the initial BTA phase by autumn, aiming for $500 billion in total trade by 2030 from current levels of around $190 billion. India-US negotiation focuses on market access, tariff reductions, and technology transfers.

Targeted concession of Indian tariffs on US high-value consumer goods

India has offered to cut tariffs on $23 billion of U.S. imports (e.g., bourbon whiskey from 150% to 100%, Harley-Davidson motorcycles from 50% to 30%, Ethernet switches from 20% to 10%). It also plans increased procurement of U.S. defense equipment, aircraft, oil, gas, and medical devices. India also lowered its tariffs on imported EVs to keep Musk in a good mood for Tesla.

Addressing Non-Tariff Barriers as being alleged by Trump:

India is launching an online platform to address U.S. exporters’ complaints about non-tariff restrictions, with input from Indian businesses. India’s low export dependence (<10% of revenue for most sectors) and strategic purchases give it negotiating power, though agriculture remains a sticking point. India is not ready to open its agricultural sector to the US.

India’s strategy:

·       Tariff Reforms: India reduced its weighted average tariff from 17% to 10.66% in the FY26 Budget, enhancing export competitiveness.

·       Production Incentives: Expanded Production Linked Incentive (PLI) schemes target telecommunications, textiles, and electronics, with tax benefits and land access in states like Gujarat and Tamil Nadu to attract US/Foreign/Domestic firms

·       Diversification: India is exploring markets in Europe, ASEAN, Africa, and Latin America, leveraging FTAs (e.g., ASEAN-India) and alliances like BRICS to reduce U.S. reliance.

·       Deregulations: The Bharat Trade Net system aims to streamline trade documentation, while ‘Make in India’ boosts local manufacturing in semiconductors and autos-Ease of Doing Business in India

·       Avoiding Trade War: India has refrained from immediate retaliatory reciprocal tariffs, prioritizing diplomacy. Commerce Minister Piyush Goyal’s discussions with U.S. officials like Jamieson Greer (USTR) emphasize reciprocal trade and market access.

·       Supply Chain Shift: India aims to replace China and Vietnam in U.S. markets by enhancing manufacturing in iron, steel, and textiles

Like China, India’s Commerce and Industry Minister Piyush Goyal has taken a firm and strategic stance on trade and tariff negotiations with the US, emphasizing an ‘India First’ approach that prioritizes national interests while fostering mutually beneficial agreements.

‘No Deal at Gunpoint’ Philosophy-India not in a rush to negotiate a BTA with the US harming domestic industry

Goyal has repeatedly asserted that India will not negotiate under pressure or rush into agreements that compromise its interests, even with U.S. reciprocal tariffs looming. In April 2025, he stated, “We do not negotiate at gunpoint,” emphasizing that time constraints are motivational but not binding if they risk India’s economic or public welfare. This was in response to Trump’s proposed tariffs, including a 26% duty on Indian goods (announced April 2, 2025, paused for 90 days until July 9, 2025, except for China’s 145% duty). Goyal underscored that trade talks must be equitable, fair, and sensitive to both sides’ concerns: “Time restrictions are good as they encourage us to talk swiftly, but until we can protect the interests of the country and people, it is never good to be hasty.”

India First and Viksit Bharat 2047-long term strategy 

Goyal termed trade negotiations as part of India’s long-term vision to become a developed nation by 2047 (“Viksit Bharat”). He insists that agreements must align with this goal and benefit Indian industries and citizens.  At the Carnegie Global Technology Summit (April 2025), he said, “All our trade talks are progressing well, in the spirit of India First, and to ensure our pathway to Viksit Bharat @ 2047 in the Amrit Kaal.”  He reassured stakeholders that India’s economic resilience and domestic market strength provide leverage, stating, “India’s strong domestic market and aspirational youth are ready to take Indian industry globally.”

Commitment to Bilateral Trade Agreement (BTA) 

Goyal is actively pursuing a Bilateral Trade Agreement (BTA) with the U.S., with the first phase targeted for completion by fall 2025 (September–October). The long-term goal is to double bilateral trade from $191 billion (2024) to $500 billion by 2030, as agreed during PM Modi’s February 2025 U.S. visit. 

In March 2025, Goyal visited Washington to meet U.S. Trade Representative (USTR) Greer and Commerce Secretary Howard Lutnick, initiating talks to reduce tariffs and non-tariff barriers. He emphasized a “win-win” deal benefiting both nations.  At the Times Now Summit (March 2025), Goyal said, “The discussions are ongoing. They are progressing well and will be for the good of both the United States and India,” highlighting enthusiasm from Indian sectors like agriculture, engineering, electronics, and textiles.

Goyal downplayed the immediate impact of U.S. tariffs, defending India’s 7–8% duties as protection against dumping (e.g., from China) rather than excessive barriers.  After Trump’s 90-day tariff pause (April 9, 2025), Goyal called tariffs an “opportunity to reset ties with the U.S.,” suggesting India could use negotiations to strengthen strategic and economic partnerships while avoiding China-style investment dependence. 

He engaged exporters (April 2025) to assess tariff impacts, with estimates suggesting $2–7 billion in export losses (textiles, pharma, auto components most exposed). Goyal assured stakeholders that India is “efficiently handling” negotiations to minimize fallout.

Tariff Concessions and Strategic Moves 

India has proactively cut tariffs on U.S. goods to ease tensions and signal openness, aligning with mutual benefit goals.

·       Bourbon whisky: From 150% to 100% (FY26 Budget)

·       Motorcycles: From 50% to 30% (e.g., benefiting Harley-Davidson). 

·       Fish hydrolysate, satellite equipment, and Ethernet switches: Duty reductions.

·       Goyal resists deep agricultural tariff cuts (e.g., 50% on apples, 42% on almonds), citing India’s 300 million farmers, but is open to industrial goods concessions (autos, chemicals) if reciprocal. 

·       He views these as strategic, not hasty, responses to Trump’s “tariff king” critique, aiming for balanced market access.

Global Trade Perspective 

Goyal links U.S. talks to India’s broader trade strategy, advocating WTO reforms to support developing nations and criticizing non-tariff barriers (e.g., EU’s climate regulations). He argues India’s tariffs target “non-market economies” (e.g., China’s unfair practices), not fair partners like the U.S.  At the Global Technology Summit (April 2025), he said, “India is well-positioned to engage in bilateral partnerships with countries that value reciprocity, trust, and fair play,” framing the U.S. as a trusted partner.   He dismissed external pressure concerns, stating, “India being in a position of such opportunity is in itself very exciting.”

Context and Strategic Stance

U.S. Tariff Pressure: Trump’s 2025 tariffs (10% blanket, 26% reciprocal, 25% on steel/vehicles) aim to address India’s high tariffs (12% average vs. U.S. 2.2%, per WTO). Goyal counters that India’s duties protect against dumping, not U.S. goods, and seeks a “fair and balanced” deal, per U.S. Deputy Secretary Christopher Landau’s talks with India (March 2025). 

Trade Surplus Context: India’s $55 billion surplus with the U.S. ($45 billion goods, $10 billion services in 2024) fuels U.S. demands for lower tariffs (e.g., agriculture, autos) and more defense purchases ($20 billion since 2008). Goyal agrees to explore purchases (e.g., F-35 jets) but insists on reciprocity, not concessions under pressure. 

Engagement Style: Goyal’s sudden U.S. trip (March 3–7, 2025) after canceling meetings reflects urgency but not panic, meeting Greer and Lutnick to clarify tariff impacts ($7 billion export loss estimate)... He followed up with exporter consultations (April 9, 2025) to align the industry with BTA goals. 

Bilateral Vision: Goyal leverages Modi-Trump rapport (February 2025 meeting) to frame trade as a strategic partnership, not a zero-sum game. He calls India and the U.S. “partners forever,” citing shared democratic values and complementary “Make in India” and “Make in America” goals. 

Critical Observations

Goyal’s stance balances firmness (protecting farmers, and MSMEs) with flexibility (high tariff cuts on whisky, and motorcycles), projecting confidence in India’s $3 trillion market leverage. His focus on Viksit Bharat aligns trade with national pride, resonating domestically.

Risks: Resisting agri tariff cuts may stall U.S. talks, as Lutnick demands open agriculture markets. The $2–7 billion export loss risk (textiles, pharma) requires deft negotiation to avoid escalation, especially if Trump’s 90-day pause ends without a deal by July 2025. 

Data Gaps: Services trade specifics (e.g., IT export gains) are less detailed in Goyal’s comments, focusing more on goods. This may underplay India’s $7.3 billion services surplus, a key leverage point. 

Geopolitical Nuance: Goyal’s anti-China dumping remarks (e.g., not encouraging Chinese investment) align with U.S. priorities, subtly positioning India as a counterweight in BTA talks.

On April 11, 2025, India and the United States finalized the Terms of Reference (ToR) for the first phase of a Bilateral Trade Agreement (BTA), marking a significant step toward deepening economic ties. This development aligns with the Indian Commerce Minister Goyal’s proactive stance on trade negotiations, emphasizing a mutually beneficial, ‘win-win’ deal without compromising India’s national interests.

Objective: The ToR outlines the framework for the first phase of the BTA, aiming to conclude an initial agreement by September–October 2025 (fall 2025). The long-term goal, set during PM Narendra Modi’s February 2025 U.S. visit, is to boost bilateral trade from ~$191 billion (2024) to $500 billion by 2030 under ‘Mission 500.’

Scope: The ToR is described as “broad-based,” covering

·       Tariff and Non-Tariff Barriers: Reducing duties and regulatory hurdles for greater market access

·       Sectoral Focus: Prioritizing “low-hanging fruits” like agriculture, engineering, electronics, textiles, and energy

·       Supply Chain Integration: Enhancing cooperation in semiconductors, defense, and critical minerals

·       Mutual Benefits: Addressing U.S. demands (e.g., agriculture, autos) while protecting India’s sensitivities (e.g., farmers, MSMEs)

Timeline: An Indian trade official noted a ‘win-win’ deal could take shape within 90 days (by July 9, 2025), leveraging the U.S.’s 90-day tariff pause (announced April 9, 2025, except for China). Virtual talks began in April, with in-person discussions scheduled for mid-May 2025.

Progress: India is reportedly “far ahead” of other countries in U.S. trade talks, with negotiations led by Additional Secretary Rajesh Agrawal (India) and Assistant USTR Brendan Lynch (U.S.). The first round concluded cordially in New Delhi (March 26–29, 2025).

Context and Goyal’s Stance

U.S. Tariff Pressure: The ToR signing follows President Donald Trump’s announcement of a 26% tariff on Indian goods (April 2, 2025), paused for 90 days to allow negotiations. Goyal has rejected pressure tactics, stating, “We do not negotiate at gunpoint,” and views the pause as an opportunity to reset ties. He insists on a deal that aligns with Viksit Bharat 2047 and protects India’s 300 million farmers and MSMEs.

Strategic Concessions: Goyal has signaled openness to tariff cuts, including:

·       Bourbon whisky: From 150% to 100% (FY26 Budget).

·       Super-Bikes-High-End Premium Motorcycles: From 50% to 30% (e.g., for Harley-Davidson).

·       Fish hydrolysate, satellite equipment, Ethernet switches: Duty reductions.

·       India is reportedly open to slashing tariffs on over $12 billion of $23 billion in U.S. imports (e.g., LNG, aircraft parts), a significant policy shift

India’s Stated Leverage: Goyal highlights India’s $3 trillion consumer market, young population, and $45.7 billion goods surplus with the U.S. (2024) as strengths. He frames India as a trusted partner, not a conduit (proxies like Mexico, Vietnam, and Canada) for rerouting goods from China, with enhanced customs scrutiny and a new global trade helpdesk to ensure compliance. There are some concerns following Trump's huge increase in tariffs on China, some companies could use India to divert exports to the U.S. market.

Indian officials emphasized:

·       Neither will India be the source of trade diversion for our products nor will it become a haven for others to divert through India.

·       India wants to remain a trusted trading partner. This is the message of Prime Minister Narendra Modi to all government officials and industry.

Balanced Approach: While Goyal resists deep agricultural tariff cuts (e.g., 50% on apples, 42% on almonds) to shield farmers, he’s flexible on industrial goods (autos, chemicals) and defense/energy purchases (e.g., $3 billion GE-HAL jet engine deal, LNG contracts). He told a joint conference with Italy’s Deputy PM (April 2025), “Deadlines expedite talks, but national interests are a priority.”

Key Sectors and Goals- U.S. Priorities: The U.S. seeks greater market access for:

·       Energy: LNG, crude oil ($12.9 billion in 2024)

·       Aerospace: Aircraft, defense equipment (e.g., Boeing, F-35 talks)

·       Agriculture: Apples, almonds, soybeans (facing India’s 30–100% tariffs)

·       Electronics: Semiconductors, chips (via iCET collaboration)

·       Autos: EVs, components (e.g., Tesla’s $50 billion market push)

India’s Priorities-India aims to:

·       Boost exports of pharma ($8.72 billion); textiles ($4.71 billion) and electronics ($10 billion)

·       Secure easier visa norms for IT professionals (H-1B restrictions a hurdle)

·       Gain Trade Agreements Act status for government procurement access

·       Protect sensitive sectors like agriculture and dairy from U.S. competition

Early Harvest Potential: The first phase may yield an “early harvest” deal, addressing simpler tariff issues (e.g., bourbon, motorcycles) before complex topics like intellectual property or procurement

Challenges and Risks

·       Agricultural Tensions: U.S. demands for lower farm tariffs clash with India’s protection of 300 million farmers, a red line for Goyal. This could delay talks.

·       Export Losses: If tariffs resume post-July 9, 2025, India faces $2–7 billion in losses (textiles, pharma, auto parts); Goyal’s exporter consultations (April 9, 2025) aimed to mitigate this.

India’s states leverage in a trade deal with the US

·       Services Under emphasis: While India’s $10 billion services surplus (IT, BPO) is a strength; Goyal’s comments focus more on goods, potentially underplaying leverage in services talks.

·       Geopolitical/China Nuance: Goyal aligns India with U.S. anti-China goals (e.g., curbing trade diversion), but border tensions with China limit deeper concessions, per External Affairs Minister Jaishankar’s remarks at the Global Technology Summit (April 2025).

·       Modi-Trump Rapport: Modi’s February 2025 U.S. visit set the BTA’s foundation, with Trump calling Modi a “great friend” but noting India’s high tariffs (52% vs. U.S.’s 26% reciprocal plan). Goyal leverages this goodwill for constructive talks.

·       Trade Infrastructure: India’s new tariff global helpdesk and customs scrutiny ensure compliance, reinforcing trust, per the Directorate General of Foreign Trade.

·       Slow Engagement Pace: Virtual talks (April 2025) and mid-May in-person rounds show urgency, with U.S. Vice President JD Vance’s planned India visit in the coming days adding momentum: “We are far ahead in trade talks with the U.S. compared to other countries ... there are lots of possibilities in 90 days."

Summary

India and the U.S. signing the Terms of Reference on April 11, 2025, for the first phase of a BTA reflects Commerce Minister Piyush Goyal’s strategic approach: prioritizing India First and Viksit Bharat 2047 while pursuing a $500 billion trade goal by 2030. Goyal’s rejection of “gunpoint” deals, tariff concessions (whisky, motorcycles), and focus on mutual benefits align with a 90-day window to finalize an initial agreement by July 9, 2025. Despite agricultural sticking points and potential $2–7 billion export risks, India’s $45.7 billion goods surplus and proactive diplomacy position it well. The BTA’s first phase could yield an early harvest deal, setting the stage for deeper integration.

A 90-day tariff pause (except for China) provides breathing room to finalize deals, particularly benefiting shrimp, electronics, and jewelry exporters. Trump’s tariffs pose short-term challenges for India, with export losses and sectoral disruptions, but India’s low export reliance, tariff advantages over competitors, and proactive measures mitigate the impact. By negotiating a BTA, reducing tariffs, expanding PLI schemes, and diversifying markets, India aims to turn trade tensions into opportunities, positioning itself as a manufacturing alternative. If successful, the BTA could lower tariffs, boost bilateral trade, and ensure stability, with India’s growth trajectory likely to remain robust at 6.5% over the next few years on average.

Trump has proposed reciprocal tariffs, where the U.S. would impose the same tariff rates on imports from a country that that country imposes on U.S. goods. For India, which traditionally maintains higher tariffs than the U.S. on certain products (e.g., agricultural goods, electronics), this could result in:

Higher Tariff Barriers on Indian Exports

·       Indian exports (textiles, pharmaceuticals, auto parts, etc.) may face increased duties, making them less competitive in the U.S. market

·       MSMEs in India (especially in labor-intensive sectors) could be severely impacted

·       Particularly vulnerable: IT services (if Trump enforces stricter visa rules), auto parts, aluminum/steel, and agri-products

Export Slowdown & Trade Imbalance

·       The U.S. is India's largest export destination. Tariffs would increase costs and reduce demand, leading to a decline in Indian export earnings.

·       U.S. buyers might turn to countries with lower tariffs (e.g., Vietnam, Mexico), hurting Indian market share

·       Could worsen India’s current account deficit, and impact employment in export-driven sectors.

Impact on U.S. Exports to India

·       India may retaliate with higher tariffs, impacting U.S. agricultural products (almonds, apples), aircraft, and medical devices

·       U.S. exporters would lose access to a large and growing Indian middle-class market for around $3 trillion, almost 50% of the US

India has long sought a comprehensive trade agreement with the U.S. A Trump presidency and tariff pressure might push India to take the following actions:

·       Negotiating Bilateral Trade Deal- India might accelerate efforts to reduce tariffs selectively in exchange for greater access to U.S. markets (especially for services and skilled labor)

·       Focus areas: U.S. access to Indian agriculture, dairy, medical devices and Indian access to IT visas (H-1B), and duty-free exports under a new trade framework

Expanding Strategic Trade Ties

·       India might deepen defense and tech cooperation, integrating trade talks into broader strategic objectives (e.g., Indo-Pacific strategy, QUAD)

·       This makes economic concessions more palatable politically on both sides

Liberalizing Specific Sectors

·       India may liberalize e-commerce, data localization, and retail sectors as concessions.

·       In return, India may demand tariff exemptions or restoration of GSP (Generalized System of Preferences) benefits.

Diversifying Trade Partners: As a long-term hedge, India may deepen trade ties with EU, UK, ASEAN, and Gulf countries to reduce dependence on U.S. markets.

WTO Dispute Settlement: If Trump’s tariffs are seen as discriminatory or unjustified, India could approach the WTO, though outcomes are slow and uncertain and it’s not certain that Trump will abide by any WTO rule.

Diversification and Domestic Boost: India may use this as a trigger to strengthen domestic industries under “Make in India” or “Aatmanirbhar Bharat” to reduce reliance on U.S. markets.

India’s total surplus from trade and remittances with the U.S. in 2024 is approximately $87 billion, comprising a $55 billion trade surplus and $32 billion in remittances. The US alone contributes almost 15% of total Indian exports (goods + services) and 20% of total Indian remittances. This surplus, driven by pharmaceuticals, IT services, and a skilled U.S.-based diaspora, underscores India’s economic leverage as its largest with any country. Ongoing BTA talks (Terms of Reference signed April 11, 2025) aim to grow trade to $500 billion by 2030, but tariff risks and agricultural sensitivities could challenge the surplus.

Trump's reciprocal tariffs could hurt Indian exports in the near term as even a 10% universal basic tariff against the earlier 2.5% may affect US discretionary consumer demand and Indian exports. Also, the high potential synchronized global economic slowdown as a result of Trump trade war policies may affect the Indian economy directly and indirectly.

India’s counterstrategy will likely focus on trade deal negotiations, possibly offering selective concessions. India is leveraging on the US-China duet; India may be playing on both sides. Smart India knows that the US needs India in its never-ending cold war strategy against China, while at the same time, India is also open to embracing China, and BRICS to keep the US under pressure. A bilateral trade agreement could stabilize ties but would require political will and economic compromises on both sides.

Looking ahead:

The WTO logic allows developing nations like India to impose higher tariffs (12% applied, 48.5% bound) under SDT to protect industries and address economic gaps, as Goyal defends for farmers and MSMEs. But Trump is unlikely to accept this logic outright, criticizing India’s tariffs as unfair and pushing reciprocity via 26% tariffs (paused until July 9, 2025). However, he may tolerate India’s WTO-compliant tariffs if BTA talks (ToR signed April 11, 2025) yield U.S. gains (e.g., LNG, agriculture) or strategic alignment, per Modi’s talks.

Without progress, tariff escalation risks WTO disputes, but India’s surplus ($55 billion trade, $32 billion remittances) gives leverage. Trump is now not ready to consider India, a developing nation. Trump often pointed out India’s growing number of dollar ballooners and also criticized India’s poor EV and hygienic standards in support of his reciprocal tariffs.

Trump may force India to cut higher rates on various US consumer goods (luxury items) and also industrial goods to at least 20% along with free & fair access to be exported by the US into India. Trump is now eyeing the Indian consumer market as India’s middle class of around 300 million is equivalent to the whole US. Thus India may eventually cut its tariffs to 20% universal on all imports or at least US imports against US universal minimum tariffs of 10%. Trump may also force India to cut exorbitant high GST or sales tax to at least 15% on all US goods.

Trump will also keep sectoral tariffs on automobiles & parts (25%), metals (25%), pharmaceuticals (15-25%), and electronics (15-25%) for national security (no dependency on a foreign country/China) and also to make America Great Again. India is set to lose to some extent.

India has to reset and reform itself into a low tax (tariff and sales tax) country for its interest, not the US as due to extremely high indirect taxes (tariffs and GST/VAT/sales tax), the cost of living is very high in India compared to average earnings levels. Thus Trump’s tariff tantrum may be a blessing in disguise for India to undertake necessary policy reform to reduce tariffs and GST/VATS to reasonable global levels, allowing foreign producers to compete fairly with local/Indian producers. India needs to come out of its decades-old protectionist policy, which is encouraging inefficiencies for domestic producers.

Bottom line

Although the Trump admin is giving priority to countries like Japan, South- Korea, India, Vietnam, and Israel in trade talks, it may not be possible to have a definitive trade deal before July 9, 2025, for all the countries including India, considering the overall complexity of the issue. Thus we may see another extension of ad-valorem reciprocal tariffs even after some Trump rhetorics. India and also other countries are waiting for July’25 as by then Trump’s popularity will face November’26 US mid-term election. And Trump’s trifecta may be questionable. Thus smart India, China and also other countries may keep the Trump admin busy in marathon trade talks till at least H1CY26. By then Trump’s popularity and credibility may be at stake due to his bellicose policies, especially on trade and tariffs.

Market impact

India’s Nifty surged almost 2% Tuesday, April 15 on hopes of an accelerated trade deal with the US and some exemptions on auto tariffs. Banks surged on deposit rate cuts ahead of much-anticipated lending rate cuts. RBI may also cut 100-150 bps cumulative in FY26.

Technical view: Nifty Future

Whatever may be the fundamental narrative, technically Nifty Future (CMP: 23350) now has to sustain over 23500-23750 for a further rally to 23900/24100-24200*-24400/24600 and a further 24900/25050-25200/25450* and 25650/26000-26200/26500 and 26650*/26800-27000/27200* in the coming days; otherwise sustaining below 22800, it may further fall to 22400/22200-22000/21800* and further  21500/21200-20900/20450 and even 19800/19600-17650/16700 in the coming days.