Kenneth I. Juster and Mark Linscott
Ignore the conventional wisdom in Washington and New Delhi that the U.S.-India trade relationship is likely to deteriorate during U.S. President Donald Trump’s second term: The two countries in fact have a huge opportunity to expand trade and a realistic path forward for doing so.
Though U.S.-India economic ties have grown steadily in the 21st century, this cooperation has underperformed relative to the extraordinary advances in virtually every other aspect of the bilateral relationship. Over the years, the United States has accumulated a growing trade deficit in goods and services with India, reaching more than $45 billion in 2022. India’s high barriers to trade led Trump to label the country the “king” of tariffs. Indeed, Indian Prime Minister Narendra Modi has used high tariffs to protect domestic industries, attract foreign investment, and promote his “Make in India” policy.
As Trump proclaims his own fondness for tariffs, skepticism has set in among U.S.-India experts about the prospects for bilateral trade. Trump has promised to impose a 10 to 20 percent tariff on all imports and to hit a select group of countries—including India—with even higher tariffs. If he goes forward with this pledge, some might respond with retaliatory tariffs. These circumstances might make one question whether the United States and India can negotiate a substantial trade agreement—something that they have never done before—in Trump’s second term.