With Donald Trump Pausing Tariffs, India Seeks to Seal Trade Deal with US: Report

On April 9, 2025, U.S. President Donald Trump announced a surprising 90-day pause on his recently implemented reciprocal tariffs for 75 trading partners, including India. This decision came just 24 hours after imposing tariffs that had triggered the most intense market volatility since the early days of the COVID-19 pandemic Reuters. For India, this pause represents a critical opportunity to accelerate bilateral trade negotiations and potentially secure a comprehensive trade deal with the United States.

Timeline of Trump’s Tariff Decisions

The sequence of events unfolded rapidly:

1. April 2, 2025: President Trump issued Executive Order 14257, implementing the “reciprocal tariffs” on virtually all U.S. trading partners, with rates varying based on their trade practices with the United States Gibson Dunn.
2. April 3, 2025: The U.S. announced a 26% tariff on imports from India as part of these reciprocal measures Reuters.
3. April 9, 2025: In a dramatic reversal following severe market reactions, Trump announced a 90-day pause on tariffs for 75 countries, including India, while simultaneously increasing tariffs on Chinese imports to 125% NPR.
4. During the pause: The U.S. reciprocal tariff on India was reduced to 10% Economic Times.

Market Reactions to the Tariff Announcements

The tariff announcements and subsequent pause triggered significant market movements globally:

• The S&P 500 had shed nearly $6 trillion in the four days following Trump’s initial tariff announcement Reuters.
• Asian markets experienced sharp declines, with Japan’s Nikkei falling over 3% and South Korea’s currency hitting a 16-year low Reuters.
• Indian markets showed resilience, with benchmark indexes initially falling only about 0.3% after the tariff announcement before recovering Reuters.
• Global markets rebounded significantly following the 90-day pause announcement CNBC.

India’s Response to the Tariff Pause

India has viewed the 90-day pause as a strategic opportunity to accelerate ongoing trade negotiations with the United States:

1. Expediting trade deal negotiations: Indian officials have indicated they want to move swiftly on concluding the first phase of a bilateral trade deal with the U.S., which had already been under discussion since February 2025 Hindustan Times.
2. Relief for exporters: The pause is described as “a huge relief” to Indian exporters, particularly for shrimp exporters who were facing tariff disadvantages compared to competitors like Ecuador Economic Times.
3. Increased import scrutiny: Indian officials have stated they will raise scrutiny on imports to identify potential dumping of goods, especially from China, as part of their trade strategy Hindustan Times.
4. Industry reactions: The Federation of India Export Organisations (FIEO), representing over 37,000 exporters, welcomed the decision, with its president S.C. Ralhan noting that “the 90-day deferral of the reciprocal tariff provides a critical window for diplomatic engagement and trade negotiations” Economic Times.

Current State of US-India Trade Relations

The bilateral trade relationship between the U.S. and India has been growing despite imbalances:

1. Trade volume: Bilateral trade reached a record $129.2 billion in 2024, making the U.S. India’s largest trading partner, while India ranks tenth among U.S. trading partners CNN.
2. Trade deficit: The U.S. has a substantial trade deficit with India, reaching $45.7 billion in 2024, a 5.4% increase over 2023 U.S. Trade Representative.
3. Key sectors impacted: Several major export sectors from India were affected by the initial tariffs, including nearly $14 billion worth of electronics products and over $9 billion worth of gems and jewelry Reuters.
4. Main traded products: Top imports from India to the U.S. include pearls, semi-precious stones, pharmaceutical products, and electrical equipment, with the top five product categories totaling more than $47 billion in 2023 CNN.

The US-India Trade Deal Negotiations

The current trade negotiations between the U.S. and India have a defined roadmap:

1. Timeline: In February 2025, India and the U.S. agreed to work on the first phase of a trade deal to be concluded by autumn 2025 (September-October), with the goal of reaching two-way trade worth $500 billion by 2030 Reuters.
2. Tariff reduction proposals: India has reportedly expressed openness to reducing tariffs on 55% of U.S. goods it imports that are currently subject to tariffs ranging from 5% to 30% Reuters.
3. Key sectors under negotiation: The trade deal is expected to focus on agriculture, automobiles, pharmaceuticals, textiles, and alcohol, all of which are politically and economically sensitive sectors for India due to high tariff rates Capital FM.
4. Duty-free imports consideration: India has expressed openness to consider duty-free imports from the U.S. across multiple sectors, including those covered under Production Linked Incentive (PLI) schemes spanning 14 distinct sectors with an allocated budget of Rs 1.97 lakh crore Times of India.

Potential Impact of the Trade Deal

The proposed trade deal could have significant implications for both economies:

1. Sector-specific impacts:
   • Agriculture: Lowering import duties on commodities such as corn, soybeans, wheat, and dairy products could have political implications for Indian farmers Capital FM.
   • Pharmaceuticals: Stricter intellectual property rights and patent regulations could affect India’s generic drug industry Capital FM.
   • Automobiles: Currently facing tariffs of up to 100% in India, this sector would likely require significant concessions Farmonaut.
   • Electronics and defense: Increased Indian imports of U.S. defence equipment, oil, and gas could help balance the trade deficit Capital FM.
2. Benefits for both countries:
   • For India: Access to potentially cheaper imports, boosting exports to a major destination, and enhanced competitiveness Capital FM.
   • For the United States: Increased export opportunities in defense equipment, oil, and gas, helping balance the trade deficit, and strengthening bilateral ties Capital FM.
3. Broader trade implications: With India’s trade-weighted average tariff rate at 12.0% (significantly higher than other emerging markets like China, Mexico, and Indonesia at 3-5%, and the U.S. at 2.2%), the deal could lead to a substantial rebalancing of global trade patterns Capital FM.

Challenges and Concerns

Despite the positive momentum, several challenges and concerns remain:

1. Tariff disparities: The significant difference between U.S. and Indian tariff rates (3.3% vs. 17% simple average, respectively) has been a point of contention, with Trump previously criticizing India’s higher tariffs Reuters.
2. Sector-specific sensitivities: Certain sectors in India, particularly agriculture, are politically sensitive, and tariff reductions could face domestic resistance Capital FM.
3. Balancing other trade negotiations: India must ensure that any concessions offered to the U.S. align with ongoing trade discussions with the European Union and the United Kingdom Capital FM.
4. Limited window of opportunity: The 90-day pause provides a critical but narrow window for negotiations, putting pressure on both sides to reach an agreement quickly Economic Times.

India’s Strategic Approach

India’s strategy in response to the tariff situation appears to be multifaceted:

1. Accelerating bilateral negotiations: External Affairs Minister S. Jaishankar has stated that India’s strategy to combat reciprocal tariffs is to engage with the Trump administration and accelerate trade deal negotiations MoneyControl.
2. Avoiding retaliation: India has chosen not to retaliate against the U.S. tariffs, instead focusing on progressing with the trade deal talks Reuters.
3. Leveraging the pause: Indian negotiators are using the 90-day window to work on concluding the bilateral trade deal, treating it as a valuable opportunity rather than a temporary relief measure Hindustan Times.
4. Positioning as a reliable alternative: With Trump increasing tariffs on China to 125%, India is positioning itself as a more reliable trading partner for the U.S., especially in sectors where it competes with China MoneyControl.

Conclusion

The 90-day pause on reciprocal tariffs has created a critical window of opportunity for India to advance and potentially finalize the first phase of its bilateral trade deal with the United States. With negotiations already underway since February and a target completion date of autumn 2025, India is moving swiftly to capitalize on this unexpected development.

The outcome of these negotiations could significantly reshape the trade relationship between the world’s largest and most populous democracies, with implications for global trade patterns, particularly in the context of increasing U.S.-China trade tensions. For Indian exporters, especially in key sectors like shrimp, electronics, gems, and jewelry, the pause provides immediate relief while negotiations continue.

Both countries stand to gain from a successful trade deal – the U.S. could reduce its trade deficit and expand markets for its goods, while India could secure more favorable terms for its exports and strengthen its strategic partnership with the United States. However, the challenges of balancing domestic interests, particularly in sensitive sectors, with international trade objectives remain significant for Indian negotiators.

As the 90-day clock ticks, the world watches to see if India and the U.S. can transform this temporary pause into a lasting trade agreement that benefits both nations.