Trade deal with US to give India first mover's advantage over Trump tariffs

US President Donald Trump and Prime Minister Narendra Modi

India's decision to negotiate a bilateral trade deal with the US will give the country a first-mover advantage to shield the domestic economy from the impact of America's reciprocal tariffs, a senior government official said on April 5.

"We are the only country with whom US is negotiating a trade deal...so tariffs may go up now, but it will go down later. There will be no trade deal unless it is mutually beneficial to both countries," the official added.

India and the US are currently discussing the contours of a mutually-beneficial Bilateral Trade Agreement (BTA), which is part of a new goal – "Mission 500” – aiming to more than double bilateral trade in goods and services to $500 billion by 2030, as agreed during Prime Minister Narendra Modi’s visit to America on February 13.

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Both nations are looking to agree to the first tranche of a mutually beneficial, multi-sector BTA by the fall of this year.

In 2023, bilateral trade in goods and services between India and the US stood at $190.08 billion.

While Trump has announced a reciprocal tariff of 26 percent on Indian goods, the official indicated that New Delhi could negotiate under section 4C of the executive order that allows room for exemptions on reciprocal tariffs.

Section 4C of the executive order says, “Should any trading partner take significant steps to remedy non-reciprocal trade arrangements and align sufficiently with the United States on economic and national security matters, I may further modify the HTSUS to decrease or limit in scope the duties imposed under this order.”

The US's reciprocal tariff measures have created ripple effects across global trade, and India has emerged as a relative winner among Asian economies, the official noted, citing the country's comparative advantage over countries like China, Vietnam, and Indonesia.

According to the source, the tariff shift has triggered fresh interest in India from global partners. “More countries are reaching out to India for trade agreements post the US’s reciprocal move,” this official said.

India is currently engaged in Free Trade Agreement (FTA) discussions with seven countries and blocs simultaneously, including the European Union, the United Kingdom, and New Zealand.

While talks for FTAs are being fast-tracked to seize the window of opportunity created by the shifting global trade environment, countries like Bahrain, Qatar, and the Gulf Cooperation Council (GCC) have shown renewed interest in pursuing trade deals with India, according to the official.

"We can also close deals by signing them in tranches; that is an option like we did with Australia," the official added.

At the same time, the government remains in close dialogue with Indian exporters to assess the impact of the US's tariff policy.

“We are in touch with exporters and will provide help if required,” the official said, adding that no major demand destruction is expected in the US as long as energy prices remain low.