India keen to close bilateral trade agreement with US despite tariffs: Jaishankar

The impact of reciprocal tariffs slapped on India by President Donald Trump is yet to be known but the Indian government is engaged with the US administration to deal with the situation by concluding a bilateral trade agreement, external affairs minister S Jaishankar said on Wednesday.

Jaishankar made the remarks at a media conclave hours after a 26% customised reciprocal tariff on all Indian imports to the US kicked in. Indian shares declined because of the escalating trade tensions, as the Reserve Bank of India cut interest rates for the second consecutive time this year.

During a visit to Washington in February, Prime Minister Narendra Modi and Trump agreed to conclude the first tranche of a bilateral trade agreement by the fall of this year. A team led by US assistant trade representative Brendan Lynch was in New Delhi last month to finalise the contours of negotiations for this trade deal.

Asked about the fallout of the US tariffs at the News18 Rising Bharat Summit, Jaishankar said, “I don’t think it’s possible to speak about what would be the impact, because we don’t know. What is our strategy? I think that’s pretty clear. We decided that we will engage the Trump administration early on this set of issues...to negotiate a bilateral trade agreement by fall of this year.”

Both sides have been “very open” and “very constructive” with each other, and India is the only country that has reached an understanding in principle on such a trade deal after Trump became the president, he said.

“Every country is tariffed. So every country...today is fashioning its own strategy of dealing with the US. In our case, our strategy has a goal. And the goal is to see whether it’s possible to actually deal with this situation by concluding a bilateral trade agreement,” Jaishankar said.

Jaishankar contended such a trade deal had been India’s objective from the time of Trump’s first term as president, and the current situation has created the circumstances for a “serious conversation”. The trade deal didn’t fructify during Trump’s first term, while the Joe Biden administration was “very averse” to a bilateral agreement and instead backed the Indo-Pacific Economic Framework for Prosperity (IPEF) initiative.

“From the Indian perspective, actually working out something bilaterally with the US is not at all a sort of a negative or a sort of an unwanted situation. On the contrary, it is something which has long been our object,” Jaishankar said.

Asked if India can conclude a trade deal with the US by the fall, Jaishankar questioned the protracted nature of trade negotiations with other countries. “I have always wondered why it takes so such a long time. Frankly, I’ve never figured it out...because I see we have trade negotiations which have been going on for decades,” he said, referring to negotiations with the European Union (EU) and the UK.

“If I were doing a negotiation, I’d be at it till I got the job done,” he said, adding that there have been more discussions with the Americans in the past six weeks than with the EU in the past two years.

Jaishankar said instead of attributing everything that is happening to Trump’s actions, matters should be seen from an Indian perspective as all the major free trade agreements (FTAs) concluded in the past 30 years were with competitive economies to the east of India – Asean and members of this grouping, Japan and South Korea - and had resulted in trade deficits.

However, natural growth potential for exports are in countries to the west of India – including West Asia, Europe, the UK, the US, and Latin America. These should be the priorities in India’s own interest, and “not because some president of another country has created a situation”, he said.

The Indian side has reciprocated the EU’s urgency in concluding a trade deal, and Europe realises the importance of deeper ties with India. “I think there’s a very serious message coming out of Europe saying we want to move forward on this. We welcome it, we reciprocated and I am pretty confident that [we] expect the pace to pick up with Europe, we have an aspirational goal,” he said.

“We’d like to close out the FTA this year,” Jaishankar said, referring to a goal set by Modi and European Commission President Ursual von der Leyen to conclude the trade deal by the yearend.