Indian Prime Minister Narendra Modi’s first visit to Washington under Donald Trump’s second term was more about business than spectacle. Unlike a grand state visit, this trip was a straightforward working meeting focused on deals and policy discussions.
During the visit, Trump announced plans to expand US military sales to India starting in 2025, including the sale of F-35 fighter jets. He also confirmed an increase in US oil and gas exports to help reduce the trade imbalance between the two countries. Both sides agreed to work toward a new trade agreement and finalize a fresh defense framework.
Additionally, Trump confirmed that the US had approved the extradition of Tahawwur Rana, a businessman from Chicago accused of involvement in the 2008 Mumbai terror attack.
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Michael Kugelman, a South Asia expert at the Wilson Center, pointed out that these are significant developments for an administration that’s barely a month old. He noted that while the Trump administration is likely to continue many of the collaborations started under Biden, they will likely be rebranded under Trump’s leadership.
However, challenges remain.
Trump has ordered that US trading partners face “reciprocal tariffs,” meaning the US would impose the same import taxes on other countries as they do on American exports. He has instructed his advisers to draft new tariffs that could take effect by April 1.
India, which enjoys a trade surplus with the US, recently lowered its average tariffs from 13% to 11% to avoid potential US tariff hikes. Whether this move has helped India avoid a trade dispute remains uncertain.
Ajay Srivastava, founder of the Global Trade Research Institute in Delhi, believes India has little to worry about since 75% of US exports to India already face low import duties of less than 5%. He argues that Trump is focusing on a few high tariffs, like the 150% duty on select products, which are exceptions rather than the norm.
However, Abhijit Das, a former trade official, warns that Trump’s strategy may not be limited to just matching import taxes. His administration could also consider factors like value-added tax (VAT), non-tariff barriers, and trade restrictions. While India’s goods and services tax (GST) on imports follows WTO rules, Trump may still use it as a reason to justify higher tariffs.
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A US government memo suggests that the reciprocal tariff policy might include costs associated with foreign regulations, subsidies, and government procurement rules. If this approach is taken, India could still face challenges ahead.
