As Washington and New Delhi inch closer to a long-awaited trade pact, optimism is tempered by structural imbalances, tariff politics, and shifting global alliances that threaten to complicate one of the world’s most important economic relationships
Our Bureau
Washington, DC / New Delhi
At the Asia-Pacific Economic Cooperation (APEC) CEOs Luncheon in Gyeongju, South Korea, US President Donald Trump made headlines not just for his flamboyant remarks about Prime Minister Narendra Modi — whom he called “the nicest-looking guy” and “a killer” — but for hinting at an “imminent” trade deal between the world’s largest and fifth-largest economies. His comments, a mix of praise, personal anecdotes, and geopolitical posturing, reflected the high-stakes complexity that now defines India–US trade negotiations.
Trump’s speech came laced with characteristic bravado. He claimed to have personally defused a potential nuclear confrontation between India and Pakistan earlier this year, linking his intervention directly to trade talks. “I called Prime Minister Modi and said, ‘We can’t make a trade deal with you if you’re starting a war with Pakistan.’ He said, ‘No, no, we must make a trade deal,’” Trump recounted, framing diplomacy and trade as part of the same power equation.
While the theatrics caught global attention, beneath the surface lies a serious and long-running economic negotiation. The United States and India have been locked in trade discussions for several years, attempting to reconcile differences over tariffs, market access, digital commerce, and agricultural goods. Each round of talks has raised hopes of a breakthrough but ended with incremental progress at best.
Balance of Trade
Meanwhile, a recent report by the State Bank of India (SBI) underscores the changing contours of the economic relationship. Despite Washington’s aggressive tariff strategy, the US trade deficit with several top partners — including India — has widened.
Between April and July 2025, America’s overall trade deficit shrank by USD 42 billion. Yet, its deficit with key partners such as India, Mexico, Vietnam, and Taiwan actually rose by USD 9 billion, reaching USD 257 billion in total trade value. For India alone, the deficit jumped from USD 17 billion to USD 23 billion within just a few months.
The numbers tell a complex story. The tariffs imposed by Washington may have succeeded in curbing the overall deficit, but they have also shifted trade imbalances rather than resolving them. While the US reduced deficits with traditional partners like China and Switzerland, new gaps have emerged with emerging economies — India included.
This shift underscores India’s growing role as both a trade partner and a competitor in the post-China global economy. For Washington, the data serves as both a warning and an opportunity: a warning that tariffs alone cannot rebalance trade, and an opportunity to engage India as a manufacturing alternative in the global supply chain.
India continues to seek greater access for its exports — especially in pharmaceuticals, textiles, and IT services — while the US pushes for reductions in tariffs on goods like Harley-Davidson motorcycles, dairy products, and agricultural imports. Washington also wants stronger commitments on intellectual property rights and data localization rules, issues on which New Delhi has stood firm to protect domestic interests.
Economists argue that both nations are pursuing “asymmetric goals”: India seeks to safeguard its developing economy and local industries, while the US is driven by domestic political imperatives and the need to showcase export gains. Trump’s tariff-driven policies, though popular among some American manufacturers, have failed to deliver uniform results across markets — particularly with partners that are structurally different from China.
Politics of Personality
In many ways, the trade equation between India and the US mirrors the chemistry between their leaders. Trump’s unpredictable mix of flattery and firmness toward Modi adds a human dimension to an otherwise technical negotiation. “He looks like you’d like to have your father,” Trump said of Modi, before quickly adding, “but he’s a killer — tough as hell.”
This blend of admiration and aggression encapsulates how Washington views New Delhi: a partner too important to alienate, yet too independent to easily bend. Modi’s image as a nationalist reformer has made him popular with Indian voters and credible on the global stage — but it also makes concessions to foreign powers politically sensitive.
The potential benefits of a comprehensive trade agreement are enormous. For India, greater market access in the US could boost exports, attract investment, and strengthen its position as a global manufacturing hub. For the US, the deal could help diversify supply chains away from China, open up India’s vast consumer market, and cement strategic influence in South Asia.
But the obstacles remain formidable. Differences over agricultural subsidies, data regulation, labour standards, and environmental commitments have repeatedly stalled progress. India’s insistence on protecting its farmers and small businesses clashes with Washington’s demands for open markets. Likewise, US tech companies remain wary of India’s tightening digital sovereignty laws, which require data to be stored locally.
Indian workers are dying but Indian leaders are taking their sweet time making this deal