Trump’s ceasefire post hints at faster India trade deal, sweeteners for Pakistan

India and Pakistan agreed to a fragile ceasefire on May 10

After nearly a four-day-long military standoff, India and Pakistan are on a fragile ceasefire since May 10 that the United States claims to have brokered between the two nuclear-armed neighbours.

Also, US President Donald Trump said that he will increase trade with both countries as he hailed their leaders for agreeing to a ceasefire.

Experts believe that while Trump’s declaration on trade signals a status quo for India with both sides looking to broker the first-cut agreement soon, for Pakistan this could mean new US incentives.

In a post on Truth Social on May 10, Trump appreciated India and Pakistan for ending the current aggression and added that “while not even discussed, I am going to increase trade, substantially, with both of these great nations.”

“While  we don’t see an  impact on the trade deal between India and US as far as Trump’s statement is concerned, Pakistan may see some incentives due to back-channel talks. We have already seen the next tranche of IMF loans being granted to them,” said Professor Harsh V Pant, Vice President, Studies and Foreign Policy, Observer Research Foundation (ORF).

India and the US are set to resume talks on a bilateral trade agreement later this month, with an Indian delegation expected to visit Washington. Meanwhile, Pakistan and America announced the strengthening of their strategic and economic partnership in a key meet held last week.

Ajay Srivastava, Founder, Global Trade Research Initiative (GTRI), told Moneycontrol that Trump’s statement on more trade with both nations indicates that the deal between India and US is on track, but it also reveals that America continues to view Pakistan as a useful partner.

“Trump’s statement tells us that the trade deal between India and US may be happening soon, while it also reaffirms that America views Pakistan as a key strategic partner in the region,” Srivastava said.

Pant echoed the sentiment that while India is concerned it is perhaps status quo, Pakistan may derive some benefits.

For both India and Pakistan, the US is the largest export destination.

Though on pause until early July, the US has announced 26 percent reciprocal tariff on imports from India and 29 percent from Pakistan. Inbound shipments from both these neighbours continue to attract a baseline duty of 10 percent in America.

While the US and India’s total goods trade (imports + exports) stood at $129.2 billion in 2024, for Pakistan it was only $7.3 billion.

India’s exports to the US stood at $87.4 billion last year, up 4.5 percent ($3.7 billion) from 2023, while Pakistan's stood at $5.1 billion, up 4.9 percent on-year.

India’s imports from the US in 2024 were $41.8 billion, up 3.4 percent on-year; as for Pakistan, the figure was $2.1 billion, up 4.4 percent.

India’s merchandise trade surplus with the US stood at $45.7 billion in 2024, versus Pakistan’s $3 billion.

Given the vast difference in the trade dynamics between India and Pakistan in relation to the US, Pant says there is no “hyphenation” as the American establishment may continue to deal with Islamabad as a marginal entity.

“The India-US trade deal is largely on track. I think there is a lot of misreading of the statement — there is no hyphenation. The US already has an engagement with India, which is of a different order and magnitude and I think that will continue, based on the larger strategic reality shaped by China’s rise,” Pant explained.

Srivastava, however, disagrees: “Washington still views India and Pakistan through the outdated `hyphenated' lens. This was made clear when  Trump, in a Truth Social post on May 10, praised the `strong and unwaveringly powerful leadership of India and Pakistan' without once mentioning terrorism. Despite Pakistan’s repeated attacks, the US chose to reward it with both diplomacy and dollars. This is opportunistic mediation.”

For many, the chain of events, from India’s decisive missile strike on May 7 (Operation Sindoor) to the IMF’s swift bailout of Pakistan on May 9, followed by a US-brokered ceasefire on May 10, indicated that the US considers Islamabad and New Delhi on par despite the vast economic differences between the two.

Srivastava said that given the recent developments, while India should engage with the US on trade, technology, and investment, New Delhi should never give America a blank cheque on its security alignment.

Pant, however, believes that the ceasefire mediation underscores that the US still has equity with Pakistan and  “can again threaten Pakistan with action if it does not comply with American demands, which would work to India’s advantage.”

While the military standoff between the two neighbours has ended in a fragile ceasefire for now, their foreign policy and trade will continue to be impacted by the latest developments, according to experts.

As Srivastava says, “Emotional diplomacy is over. India, like China, must play chess, not cricket.”