Introduction
The India-US trade deal has become a hot topic once again after former US President Donald Trump suddenly softened his tone toward New Delhi. Not long ago, he had slapped a 50% tariff on Indian goods, criticized India’s growing ties with Russia, and accused India of unfair trade practices. Then, almost overnight, he called Prime Minister Narendra Modi a “good friend” and spoke positively about moving forward with negotiations.
For many, this sounded like good news. But for experienced diplomats such as Kanwal Sibal, India’s former Foreign Secretary, this shift is more of a warning than a celebration. He points out that such personalised decisions, taken on the whims of individual leaders, carry serious risks. Trade relations between nations are best handled through structured, transparent, and process-driven negotiations—not unpredictable mood swings.
This article takes a deep dive into the India-US trade relationship, Trump’s unpredictable approach, the lessons from Kanwal Sibal’s caution, and the road ahead for India’s economic and diplomatic strategy.
The Long and Complicated History of India-US Trade Relations
Early Years of Limited Engagement
In the decades following India’s independence, trade with the United States remained modest. India’s protectionist policies and America’s Cold War alignment with Pakistan limited the scope of economic ties.
Economic Liberalization and Growth in Trade
The 1991 economic reforms marked a turning point. India opened up to foreign investment, dismantled licensing regimes, and attracted global companies. From information technology services to pharmaceuticals, India became a key player in the American market.
By the 2000s, bilateral trade had grown steadily. The United States emerged as one of India’s largest trading partners, with India exporting IT services, textiles, and pharmaceuticals, while importing defense technology, energy, and machinery.
The Strategic Shift
Trade was no longer just about goods and services—it became part of a larger strategic partnership. Cooperation expanded into defense, climate change, and counterterrorism. Still, trade disagreements remained frequent, especially over tariffs, intellectual property, and agricultural access.
Trump’s Unpredictable Approach to Trade
The Tariff War Against India
During his presidency, Trump often accused India of being a “tariff king.” His administration withdrew India’s benefits under the Generalized System of Preferences (GSP), costing Indian exporters billions in duty-free access.
Then came the harshest move: a 50% tariff on several Indian goods, combined with penalties on oil imports from Russia. This hit sectors like steel, textiles, and agriculture particularly hard.
From Criticism to Praise
What puzzled many was Trump’s sudden change of tone. From calling India unfair, he switched to calling Modi a trusted partner and hinted at a “big trade deal.” Experts like Kanwal Sibal interpreted this not as a genuine change of heart but as a classic example of personalised decision-making—where policy changes reflect the leader’s immediate mood or personal agenda.
Why This Matters for India
For India, such swings create uncertainty. Businesses cannot plan exports or imports when rules change overnight. Diplomats cannot negotiate seriously when yesterday’s threat turns into today’s promise. Trust, once broken, takes years to rebuild.
Kanwal Sibal’s Warning on Personalised Diplomacy
Risks of Unpredictability
Sibal emphasizes that diplomacy should be institutional, not personal. When deals depend on individual leaders’ moods, they lack continuity. A handshake today may not survive tomorrow’s tweet.
Concessions Without Guarantees
If India resumes trade talks without tariff relief, it may be forced into deeper concessions. Trump could then claim victory at home by presenting the deal as proof of his tough negotiation style, leaving India at a disadvantage.
Undermining Institutions
Personalised diplomacy bypasses ministries, negotiators, and established processes. This weakens both domestic institutions and international credibility.
How Tariffs Impact the Indian Economy
Agriculture and Dairy Products
High tariffs directly hurt Indian farmers and exporters. For example, US restrictions on dairy imports from India cite sanitary standards, while India resists American dairy due to religious sensitivities. Tariff wars make this worse.
Small and Medium Enterprises (SMEs)
Indian SMEs that export textiles, leather, and handicrafts face steep competition once tariff benefits are withdrawn. Many lose their competitive edge in the US market.
IT and Services Sector
Although tariffs apply mainly to goods, the hostile environment spills over to services too. Stricter visa rules for Indian IT professionals have already created challenges.
The Role of WTO and Global Trade Rules
Why WTO Matters in This Debate
The World Trade Organization (WTO) exists to prevent exactly this kind of unpredictable, unilateral action. However, Trump’s administration frequently bypassed the WTO, preferring bilateral pressure tactics.
India’s Legal Options
India has filed multiple complaints at the WTO against US tariffs. But with the WTO appellate body weakened due to US resistance, enforcement remains uncertain.
Strategic Alternatives for India
Strengthening Ties with Europe and Japan
Kanwal Sibal suggests that India should not over-rely on the US. Stronger trade ties with the European Union and Japan can balance American unpredictability.
Deepening Relations with Russia and BRICS
Despite pressure from the West, India continues to maintain energy imports from Russia. Through BRICS and the Shanghai Cooperation Organisation (SCO), India can strengthen multilateral trade options.
Building Domestic Resilience
Atmanirbhar Bharat (self-reliant India) initiatives aim to reduce dependence on imports by boosting local manufacturing, digital services, and renewable energy.
People Also Ask (Q&A Style)
Q1: Why did Trump call Modi a ‘good friend’ after imposing tariffs?
Trump’s sudden praise reflects his personalised approach. Experts argue it is less about policy and more about creating political optics.
Q2: What is the biggest hurdle in India-US trade negotiations?
Key hurdles include tariffs, market access for agricultural goods, intellectual property rights, and data localization rules.
Q3: Can India trust Trump’s promises on trade?
Trust is limited. Past decisions show that promises can be reversed suddenly, so India must demand concrete commitments before agreeing.
Q4: How do tariffs affect Indian exporters?
Tariffs increase the cost of Indian goods in the US market, making them less competitive compared to products from other countries.
Future Scenarios for India-US Trade
Optimistic Scenario
If the US agrees to roll back tariffs and India offers limited market access in return, a balanced trade deal could emerge. This would boost investor confidence.
Pessimistic Scenario
If negotiations restart without tariff relief, India could end up making concessions without meaningful gains. Trump may then claim victory in domestic politics.
Most Likely Scenario
India will proceed cautiously, insisting on reciprocity while simultaneously expanding partnerships with other powers. This hedging strategy minimizes risks.
Conclusion
The India-US trade deal represents more than economics—it reflects the balance of power, trust, and diplomacy between two of the world’s largest democracies. While Trump’s sudden friendliness toward Modi might sound promising, Kanwal Sibal’s warning cannot be ignored: personalised diplomacy is unstable and risky.
India must stay firm, avoid one-sided concessions, and continue diversifying its trade partners. Only a process-driven, institutional approach can guarantee long-term stability in bilateral relations.
FAQs
Q1: What does “personalised diplomacy” mean?
It refers to decisions made by individual leaders based on personal preferences, moods, or relationships, rather than structured institutional processes.
Q2: How has Trump’s approach impacted India?
His tariffs hurt Indian exporters, created uncertainty for IT professionals, and weakened trust in bilateral negotiations.
Q3: What can India do to reduce dependence on the US?
By strengthening ties with Europe, Japan, and BRICS nations while also building domestic industries through Atmanirbhar Bharat initiatives.
Q4: Does WTO offer any solution to tariff disputes?
Yes, but the WTO system is weakened. India has filed cases, but enforcement remains difficult due to US resistance.
Q5: What should India focus on in future negotiations?
India should prioritize reciprocity, demand tariff relief, and avoid concessions without guarantees. Clear timelines and mutual accountability are essential.