India's Trade Deals: Navigating US, UK, and the Challenges Ahead

The Indian government has responded cautiously to US President Trump's decision to slap 25% tariffs on India, citing its need to protect favorable terms in its deal with the UK. India secured a landmark free trade agreement with the UK earlier this month, which is projected to boost Britain's GDP by £4.8 billion annually and increase bilateral trade by £25.5 billion in the long run. The deal is reciprocal, with the UK eliminating tariffs on 99% of all Indian goods. Despite the comprehensive nature of the agreement, some friction persists, particularly over the UK's carbon tax.

The Indian government has responded cautiously to US President Trump's decision to impose 25% tariffs on Indian goods, while also highlighting its commitment to the newly signed Comprehensive Economic Trade Agreement (CETA) with the UK. The Indian government's response underscores its strategic focus on maintaining favorable trade terms with the UK, despite the tariff hikes from the US.

India secured a landmark free trade agreement with the UK earlier this month, which is projected to boost Britain's GDP by £4.8 billion annually and increase bilateral trade by £25.5 billion in the long run. The deal is reciprocal, with the UK eliminating tariffs on 99% of all Indian goods. This agreement is expected to significantly boost India's technical textile exports to the UK, with projections suggesting a rise to $1 billion by 2030 from the current $240 million [1].

Despite the comprehensive nature of the UK agreement, some friction persists, particularly over the UK's carbon tax. The Indian government has emphasized its need to protect favorable terms in its deal with the UK, citing the strategic importance of the agreement for India's economic growth and trade diversification.

The US tariffs, which include an unspecified penalty for buying Russian oil and weapons, are expected to pose a headwind to India's GDP growth. Experts have noted that the extent of the economic impact will depend on the size of the penalties imposed. The tariffs are likely to affect key sectors such as marine products, pharmaceuticals, textiles, leather, and automobiles, where bilateral trade has been robust [2].

The Indian government has stated that it is studying the implications of Trump's announcement and remains committed to a mutually beneficial bilateral trade agreement with the US. However, the government has also emphasized its commitment to protecting the welfare of its farmers, entrepreneurs, and MSMEs, indicating that areas like agriculture and dairy may be key sticking points in the negotiations.

The hope among many is that tariffs will get negotiated lower, and the higher reciprocal tariff rate of 25% may be temporary until a detailed trade deal with the US is secured. The two sides have set a fall deadline to conclude the deal. While the impact could be contained, given the Indian economy's relatively more domestically oriented nature, the tariffs could prompt the central bank to make deeper rate cuts to protect growth [2].

References:
[1] https://economictimes.indiatimes.com/news/economy/foreign-trade/india-eyes-1-billion-in-technical-textile-exports-to-uk-by-2030-under-new-ceta-trade-deal/articleshow/123011815.cms
[2] https://www.bbc.com/news/articles/c0j91p8w20vo