As US demands one-sided deals, can India hold out?

It is three days from now, on August 1, the United States’ liberation day tariff rate of up to 26% will become applicable for exports from India. Even if US President Donald Trump decides to push the deadline further, Indian exports of goods are facing a 10% tariff. Following the successful conclusion of the Comprehensive Economic and Trade Agreement (CETA) with the United Kingdom on July 24, India is in a better position to wait rather than enter into a bilateral tariff agreement with the US having onerous conditions.

The good news for India is that the US’ tariff rates have not materialised in the agreements signed so far.

Not as bad as threatened

For example, Japan faced a 25% ‘reciprocal’ tariff, but the agreement with the US signed provides for a rate of 15% on Japanese exports to the US. This is much higher than the 1.5% tariff on Japanese goods before Trump took over. But everyone is happy that the uncertainty may be over and that the threat of 25% tariff has not materialised!

Indonesia’s exports to the US in 2024 were $28.2 billion, while India’s goods exports were $79.4 billion. Indonesia has agreed to eliminate 99% of tariffs on US goods, but its exports will face a 19% tariff in the US. More importantly, it was forced to accept dilution of its regulations on food safety, digital trade, and industrial standards. Indonesia has also agreed to waive pre-shipment inspection or verification requirements. The US has also forced Indonesia to buy $4.5 billion of agricultural produce (soybeans, wheat, cotton) from it.

On July 27, Trump announced another one-sided deal, this time with the European Union (EU). The EU has agreed to allow the US to charge a 15% tariff on most goods imported from the EU, but the EU will not charge any duty on goods imported from the US. In addition, the EU will purchase $750 billion of energy over the next three years.

If the EU and Japan could be persuaded to such favourable deals to the US, the pressure on Indian negotiators can well be imagined.

US and India on GM food

In the US, the Department of Agriculture has not fixed any limit for GMO labelling. Instead, the National Bioengineered Food Disclosure Standard (NBFDS) guidelines mandate labelling if a food contains detectable modified DNA that was altered through a bioengineering technique. The words ‘genetically modified’ are not mandatory on the food labels in US. Moreover, the US has exempted refined oils, sugars, and animal products which have been given GM feed. Animals in the US are mostly fed genetically modified corn or soybeans.

In India, the FSSAI has issued the Food Safety and Standards (Genetically Modified Foods) Regulations, 2022, which require compulsory labelling if a food item contains a GM ingredient of 1% or more. The label must state that the item contains genetically modified organisms, and it must be on the front of the package. India also bans GM ingredients in infant food. Moreover, prior approval from the FSSAI is compulsory for the manufacture, sale, or import of any GM food item.

Even if India agrees to import GM maize and soybean for cattle feed, Indian negotiators may have to waive its labelling regulations for imports from the US.

Conclusion

Despite all the negative press the US has attracted globally, on July 10, the Budget Lab at Yale University estimated that the tariffs imposed by the US may generate $2.6 trillion in revenue over the 2026-2035 period. Even after taking into account the negative impact on inflation, lower consumer expenditure, higher production costs, and even the decline in GDP, additional revenue from tariffs may still be about $2.2 trillion.

So, Trump seems to be delivering what he promised.

Siraj Hussain is former Union Agriculture Secretary.

Disclaimer: The views expressed here are the author's own. They do not necessarily reflect the views of DH.