India Prepares for Trade Talks with the U.S.

By Manoj Kumar
NEW DELHI (Reuters) – India is gearing up for potential trade negotiations with the United States, anticipating increased investments from U.S. firms and higher exports following President-elect Donald Trump’s inauguration.

While safeguarding its manufacturers against prospective U.S. tariff increases on exports, India aims to bolster relations with Washington as Trump has threatened tariffs of up to 60% and other restrictions on imports from China.

Key Commercial Issues

Trump's Policy on China

India intends to leverage Trump’s stance toward China by attracting investments and businesses seeking to diversify their supply chains. To align with Trump’s 'America First' agenda, India is prepared to offer additional incentives — like tax reductions and land access in states such as Andhra Pradesh, Gujarat, and Tamil Nadu — in sectors including semiconductors, electronics, aircraft components, and renewable energy.

India also aims to integrate into the U.S. global supply chain by manufacturing low-end and intermediate products, ranging from chips and solar panels to machinery and pharmaceuticals.

Energy and Security

To address U.S. concerns over trade imbalances, India is open to increasing energy imports, specifically LNG, and defense equipment while maintaining its own foreign and trade policy independence.

Discussions on co-producing General Electric’s fighter jet engines by state-run Hindustan Aeronautics in India have faced challenges. However, there is hope that the 2023 defense industrial cooperation roadmap will accelerate technology sharing and co-production initiatives.

Broader Trade-Cum-Investment Pact

Industry groups and the government advocate for a broader trade and investment agreement with the U.S., which would assist Indian manufacturers in integrating into global supply chains while ensuring flexibility to protect national interests.

Boost to Exports

In exchange, India aims to boost exports in sectors where it holds a growing comparative advantage over China, such as pharmaceuticals, textiles, footwear, engineering goods, and chemicals.

Aiming for U.S. Investments

India is targeting increased U.S. investments, motivated by Apple Inc. commencing iPhone production locally. The country hopes to attract more companies by providing incentives, simplified regulatory processes, and affordable land. The U.S. is already India’s third-largest investor, with $65 billion in direct investments from 2000 to 2023.

Selective Tariff Concessions

Advisors have suggested considering selective tariff reductions on items like pork and Harley-Davidson motorcycles, which have minimal domestic demand. Broader concessions could be negotiated in exchange for benefits including increased visas for Indian professionals and investments to boost exports.

Two-Way Trade

Trade between India and the U.S., India’s primary trading partner, exceeded $118 billion in 2023/24, with India enjoying a trade surplus of $32 billion. Industry estimates indicate that trade could expand by $50 billion in the next two to three years, underscoring the potential for stronger economic relations.