**New Delhi**: Ongoing trade talks between India and the US highlight concerns over the proposed Reciprocal Tariff Plan, while India seeks a potential Free Trade Agreement with Israel to enhance bilateral trade, currently exceeding $10 billion, despite challenges and sectoral implications.
Recent developments in international trade have highlighted ongoing negotiations between India and the United States, particularly in the wake of the US administration’s proposed Reciprocal Tariff Plan, announced by President Donald Trump on February 13. This policy aims to impose higher tariffs on countries with elevated tariffs on US goods, potentially affecting key Indian exports. Accompanying these tensions, Indian Commerce and Industry Minister Piyush Goyal’s visit to Washington D.C. underlines the urgent discussions surrounding trade relations between the two nations.
During Goyal’s discussions with US officials, topics included the balancing of trade tariffs, strengthening supply chain resilience, facilitating market access, and managing digital trade and data flow. Goyal’s visit aimed to ensure that any adjustments to tariff structures remained equitable and did not disproportionately burden Indian exports. In light of the US being India’s largest trading partner, with a trade volume exceeding $190 billion in 2024, the implications of these discussions are significant for Indian exporters, particularly in high-value sectors such as automobiles, pharmaceuticals, and chemicals.
Ajay Srivastava, Founder of the Global Trade Research Initiative, pointed out the potential sectoral impacts of the proposed tariffs on specific industries. According to Srivastava, “Trump’s proposed reciprocal tariffs could have varied sectoral impacts”, indicating that sectors like automobiles, jewellery, and pharmaceuticals would be particularly vulnerable given the 7.7% average tariff on US goods against a mere 2.8% on Indian exports to the US. He advised caution against hastily entering a Free Trade Agreement (FTA) under demanding conditions, as the negotiations could require significant concessions that may not align with India’s long-term interests.
An alternative strategy suggested is the Zero-for-Zero tariff deal, which could involve India removing tariffs on a range of US industrial goods, provided the US reciprocates. Srivastava highlighted that excluding agriculture from this deal would protect India’s farmers, balancing trade benefits while avoiding broader risks.
In parallel, India maintains strong diplomatic and economic relations with Israel, which have developed significantly since the establishment of formal ties in 1992. Bilateral trade between India and Israel has surged from approximately $200 million in the early 1990s to over $10 billion today, driven largely by sectors like defense and technology. Defence agreements alone account for substantial sales, with Israel being one of India’s top three arms suppliers.
Despite the promising trajectory of trade, neither country has yet formalised a Free Trade Agreement (FTA), which could enhance investment possibilities and collaboration in vital sectors such as agriculture, renewable energy, and technology. The Federation of Indian Chambers of Commerce and Industry (FICCI) and the Israel Export Institute estimate that a Free Trade Agreement could potentially double bilateral trade to $20 billion by 2030.
An FTA would also benefit India’s pharmaceutical industry and agricultural products by providing greater access to the Israeli market while allowing Israeli firms to exploit the Indian market for high-tech goods and advanced agricultural tools. Israel, known as the “Startup Nation”, has existing strengths in areas like artificial intelligence and cybersecurity, which could complement India’s burgeoning tech sector.
Nevertheless, challenges remain. India’s reluctance to engage in FTAs stems from concerns about potential trade imbalances, though the success of its FTA with the UAE (CEPA) serves as a testament to the potential mutual benefits of well-structured agreements. As both countries seek to navigate regulatory barriers and quality standard differences, establishing a Joint Economic and Trade Committee could be instrumental in streamlining processes for trade facilitation.
In conclusion, both the United States and Israel present significant opportunities and challenges for India’s trade strategy as it seeks to strengthen bilateral relations with strategic partners amid a shifting global landscape. The upcoming months will be critical as India continues to balance its trade interests while fostering deeper economic engagements with these important nations.
Source: Noah Wire Services
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