Whatever the current government [in India] does, it will be seen as they basically capitulated to President Trumps demand, said Mukesh Aghi, the President and CEO of the U.S.-India Strategic Partnership Forum. So they are in a no-win situation.
The White House views tariffs as a cudgel to extract concessions from foreign countries both on trade matters and a wide array of other foreign policy priorities. But it has failed to grasp, or simply doesnt care, how much trading partners domestic politics factor into the discussions, and ultimately may trump even the existential economic threat the U.S. can wield.
Talks with South Korea stalled while the country, under a caretaker government, moved to elect a new leader. Negotiations with Japan have been snagged by the Trump administrations demand that Tokyo increase defense spending and insistence on maintaining its 25 percent tariff on auto and auto parts imports, a massive blow to one of Japans culturally defining industries. EU leaders have balked at U.S. efforts to undermine their VAT, a domestic consumption tax.
India has some of the highest tariffs of any major economy in the world, with an average rate of around 17 percent. Its government, in particular, has long sought to protect the countrys millions of subsistence farmers, who have outsized political clout.
In 2020, after the Parliament of India passed farm legislation, farmers held a sustained protest for more than a year and eventually succeeded in getting the laws repealed. They protested again in 2024, criticizing the government for not doing more to help farmers.
India is protective of its farmers, which is why they have relatively high tariffs compared to anywhere in the world, said Sharon Bomer Lauritsen, a former agriculture negotiator at USTR who currently works with AgriTrade. Theyre going to protect their farmers.
The Trump administration has been here before. During his first term, negotiators worked with India in an attempt to secure a bilateral trade deal similar to agreements the administration was able to negotiate with Japan and South Korea.
The deal would have centered around three areas increased access to Indias agricultural, information technology and medical devices markets. But as talks dragged on and the scope of the deal shrank, Trump scrapped the plan.
They got very close, really, really close to concluding a first-ever bilateral trade deal, said Mark Linscott, a former negotiator for USTR who was involved in negotiations with India. This time around its clearly a priority for both sides &. Its the agreement that got away.
Much of the challenge has been opening Indias agricultural market, particularly when it comes to the genetically modified crops grown in the U.S. and dairy products. India, as a majority Hindu country, has significant religious concerns about the import of byproducts from cows.
While the Biden administration was able to secure increased access for specialty agriculture products like nuts and cranberries, India is reluctant to make deals that undercut its own farmers.
Any early deal with India would likely focus on products that are not readily accessible in the country, like fruits and vegetables, nuts, alfalfa and potentially ethanol.
