Trump Trade: No Deal Or Temp Deal?

By the time this went to print, Trump hadn’t specified by how much he will “substantially raise” tariffs on Indian exports on top of the 25% tariffs already imposed. Whatever the hit, with India’s $86.5bn in goods exports to US under threat, it’s fair to ask: Is India the only one buying oil from Russia?Why is US focusing on restricting oil imports? Is its position in the Russia-Ukraine war as clearcut as it claims? Crucially, is Trump targeting India because he can’t go after China? It’s worth exploring the facts behind the claims.Why target India alone? Nato, US itself, and China import heavily from Russia. In 2024, EU bought $39.1bn worth of Russian goods, including $25.2bn in oil & fertilisers, non-alloy steel, aluminum, platinum group metals, titanium, radioactive substances, copper, nickel. US imports were worth $3.3bn, including platinum group metals, radioactive chemicals, titanium, turbojets, oil cakes etc.China was the biggest buyer of Russian oil – worth $62.6bn, more than India’s $52.7bn. Yet, Trump likely singles out India because China pushes back hard and controls critical materials vital to US defence and tech. Ignoring imports by its allies and rivals makes US’s tariffs on India seem more political than strategic.Washington sanctions crude oil because doing so doesn’t hurt US. In 2024, it produced about 70% of the oil it consumed – worth $370bn – $380bn of total $570bn. In contrast, India imports 85% of its oil needs and is more vulnerable to supply shocks and price hikes. This allows US to use oil as a pressure tool, while keeping its own economy safe.The real reason behind US’s actions isn’t trade but frustration with India’s independent stance. Washington’s trade war, initially aimed at Beijing, failed. Between 2017 and 2023, China’s exports rose by over $1tn, US trade deficit grew by $762bn. When Trump tried to raise tariffs on China to 145% this time, China and Japan sold $1tn in US treasury bonds, crashing the markets, forcing him to pull back. Unable to take on Beijing again, US signed one-sided deals with EU, Japan, Vietnam among others, but India didn’t give in.US wants to punish Russia for the war in Ukraine. But US played a key role in creating the crisis. Economist Jeffrey Sachs and others have noted that in the early 1990s, US leaders assured Russia Nato wouldn’t expand eastward. Yet Nato expanded in 1999 and 2004; US pushed for Ukraine and Georgia to join in 2008. After the 2014 Maidan revolution, US backing for Ukraine’s Nato ambitions only increased. The war could’ve been avoided had Ukraine stayed neutral and mutual security guarantees been in place.India is American tech firms’ biggest market and a vital source of data, users and talent. Companies like Google, Meta, Amazon and Microsoft rely on India to test products, train AI models, drive global growth. If India allows Chinese giants like Tencent or Alibaba to compete freely, it could end monopoly of US firms.Trump ignores that US earns far more from India than vice versa. He talks up the $44bn trade surplus in India’s favour, but leaves out the over $80bn US makes yearly from India. Indian students contribute over $25bn to US economy; American tech, finance and consulting firms earn billions through operations in India. Add defence deals, subscription services, and American companies’ back-end centres – money flows heavily in US’s favour.On a trade deal, India can show flexibility on many issues but must firmly protect its red lines on agriculture and dairy. It shouldn’t agree to changing its patent laws, data rules, or procurement policies – or accept pressure on Brics. India must also insist on legal certainty of no new tariffs post deal. Or else, India should be ready to walk away. No deal would be better than a bad deal.Ajay Srivastava is an expert on trade & tech issuesDays after Trump announced he would impose 25% tariffs on Indian exports to US, his fresh warning about raising these tariffs “substantially” made it clear that to maintain Indian exports to US India must negotiate a costly short-term trade deal. This would allow it to continue engaging with Washington.In line with US trade deals with EU (15%), Japan (15%), Indonesia and Philippines (19%), or Vietnam (20%), a trade agreement might reduce India’s tariff exposure to about 10-15%. This would maintain cost competitiveness and provide much-needed certainty for Indian exports to US, which were worth around $87bn in 2024.Trump’s unilateral trade measures, press-driven ultimatums, and reciprocal tariffs do mean that trading partners, in his various deals, bear disproportionate obligations. Likewise, India might have to give up more than it gains if an agreement is reached with US.• Despite five rounds of talks, New Delhi and Washington are still at odds over US access to the Indian market, especially in agriculture and dairy sectors, and over India’s oil and arms imports from Russia. India continues to impose sanitary regulations and high tariffs on US produce. For instance, skimmed milk powder still attracts 60% tariff. Dairy products such as fresh cheese and curd are also subject to 30% import duties.In addition, India has strict restrictions on genetically modified soybeans and corn, two of the largest US agri products. Importing livestock products into India necessitates an import licence. In order to negotiate a favourable trade agreement with US and other nations, India will need to figure out how to relax some of these onerous regulations.• The next challenge is India’s ongoing imports of Russian oil and arms, driven by national interest and economic pragmatism. If India doesn’t reduce its involvement with Russia, US has warned that secondary sanctions and additional tariffs may be imposed. In this context, too, it will be better for India to have an interim deal. That will probably mean India agreeing to buy some US energy.Making a deal should be understood as a tactical truce. Its short-term benefit would be purchasing time – time to shield Indian exporters, particularly textile and pharma industries, from the full force of punitive tariffs. It will also allow India to bring Washington to the negotiation table, to discuss the additional tariffs on India if it continues buying Russian oil. Tariff arbitrage is still a legitimate benefit even if the negotiated tariff isn’t lowered to zero.Additionally, a US deal would enhance India’s chances of negotiating advantageous FTAs with others, including EU.India will have to make concessions, though. Consider enacting a duty-free Tariff Rate Quota for dairy products in place of higher tariff barriers. Religious sensitivity towards US dairy products (due to the meat feed given to livestock there) could be solved through the right labelling, after which a certain amount of goods could enter India at a zero tariff rate. Plus, consider reducing tariffs on the likes of apples, oilseeds and marine products.For a trading economy looking to maintain its global integration, a deal offers a structured negotiation path, some predictability, and short-term relief. Even if it’s unfair, it will give India breathing room to safeguard its export interests, and advance trade (if not with US, with others) in the long term. The alternative is an economically riskier corner, where it has little leverage at a time when global trade is being redefined not by WTO rules but by power politics and protectionism.Anisree Suresh is a research associate at Takshashila Institution. Views are personal