The meeting between Prime Minister Narendra Modi and US President Donald Trump has reinforced the evolving Indo-US partnership, with both leaders announcing key agreements in trade, energy, and defence. While both are known to be tough negotiators, their shared goal of strengthening bilateral ties has paved the way for deals that could have long-term benefits for both nations. However, the issue of trade tariffs remains a potential flashpoint.
Trump has consistently pushed for “reciprocal tariffs” on trade partners, and India’s high tariffs on certain products have long been a sore point. The White House fact sheet outlining this policy makes comparisons with India sectorally (agriculture) and on specific products (motorcycles). However, the ambiguity in Trump’s approach suggests that he is keeping his options open, possibly using tariffs as leverage in broader trade negotiations. India’s trade surplus with the US was around $35 billion in FY24 and it has signalled its willingness to increase energy imports from the US from $15 billion to $25 billion. The two countries also announced their intent to double bilateral trade to $500 billion by 2030. . Additionally, ongoing defence deals could also contribute to balancing trade. If trade talks stall, India might have to consider alternative export markets or even impose counter-tariffs, as it did during Trump’s previous term. However, this may not be a desirable route as it could escalate the trade war, destabilising the macroeconomic environment and potentially hurting India more than the US, especially if the latter expands its action on export-oriented sectors such as IT services and textiles. The US accounts for 18 per cent of India’s total exports, and it is India’s largest export destination.
A significant outcome of the meeting is the continued expansion of defence ties. The US has emerged as one of India’s top defence suppliers, and fresh agreements could bolster India’s military capabilities while benefiting American arms manufacturers. India will have to balance this growing defence partnership with its ambitions to develop a strong domestic defence manufacturing base under the “Atmanirbhar Bharat” initiative. India’s commitment to increasing US energy imports is a win-win for both economies. The US benefits from a reliable export market, while India diversifies its energy sources. The pricing will be crucial though.
Despite progress in multiple areas, India must be prepared for tough negotiations on trade. Trump’s transactional approach means he will likely continue pushing for greater market access while using tariffs as a bargaining chip. If talks do not proceed as planned, India must have a contingency strategy, whether through countermeasures or alternative trade partnerships. The Indo-US relationship is poised for growth, but its trajectory will depend on how both nations navigate challenges in trade and economic policy.