Sunday, 23 Mar, 2025
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As New Delhi prepares for potential shifts in its relationship with Washington under a Trump 2.0 administration, understanding the complexities that have shaped this dynamic bilateral partnership becomes essential.
Donald Trump has been sworn in as the 47th president of the US, marking a remarkable return to the White House four years after his electoral defeat. At 78, Trump assumes office as the oldest president in US history, inaugurating a contentious chapter in American politics. His inaugural address on January 20 from the Capitol Rotunda struck a combative tone, taking aim at outgoing Democratic President Joe Biden with sharp criticism.
As New Delhi braces for potential volatility in its trade relationship with the returning US president, a review of the past two terms sheds light on the road ahead. Shaped by fluctuating geopolitical dynamics and competing economic interests, the trajectory of India-US ties offers critical insights into how both nations might navigate future challenges.
Bilateral trade between New Delhi and Washington saw significant growth, with trade in goods and services increasing from $118 billion in 2016 to nearly $146 billion by 2019. During this period, the US cemented its position as India’s largest trading partner, reflecting strengthened economic ties. However, 2019 marked a critical juncture in their trade relationship, as the US revoked India’s preferential trade benefits under the Generalized System of Preferences (GSP) programme. This move, impacting $6 billion worth of Indian exports, was part of the Trump administration’s broader strategy to address trade imbalances and demand improved market access for American goods in India.
Tariffs were a major point of friction during the Trump 1.0 administration. The US criticised India for maintaining high import duties on products like Harley-Davidson motorcycles and medical devices, with Trump frequently labelling India as a “tariff king.” In response to US tariffs on Indian steel and aluminium, New Delhi retaliated by imposing tariffs on 28 American products, escalating tensions and complicating bilateral trade relations. These actions highlighted the broader trade disputes between the two countries, as both sought to protect domestic industries and address trade imbalances.
Trade relations between India and the US have long been fraught with unresolved disputes. Despite prolonged talks, a totalisation agreement, crucial for allowing Indian workers in the US to repatriate social security contributions, remains elusive. Efforts to finalise a mini trade deal during the Trump administration faltered over unmet demands, and his continued criticism of India’s high import tariffs underscored the depth of bilateral tensions. As both nations look to recalibrate their economic partnership under a new Trump presidency, these enduring challenges highlight the need for careful navigation to achieve a more equitable and stable trade relationship.
However, the India-US relationship has evolved beyond trade, with both countries participating in key regional groupings like the Quad and the Indo-Pacific Economic Framework for Prosperity (IPEF). These alliances reflect their shared commitment to regional stability and sustained economic growth. A significant development in this collaboration is the signing of a pact to establish a semiconductor supply chain and innovation framework, highlighting both nations’ focus on critical technologies.
The renewal of the Trade Policy Forum in 2021, after a four-year stalemate, marked a significant step in reviving trade ties. This renewed engagement led to a breakthrough at the World Trade Organisation (WTO), where India and the US resolved seven long-standing disputes, signalling the potential for a new chapter in their economic partnership. With areas of mutual interest identified—such as critical minerals, resilient supply chains, and high-tech trade—the two nations have outlined a forward-looking roadmap to deepen cooperation and address global challenges.
This dynamic partnership underscores the ambition to not only enhance trade but also to shape the future of global economic and technological landscapes. Positioned as indispensable allies in an interconnected world, India and the US are working together to confront emerging challenges while capitalising on shared opportunities for growth.
