TACO vs Tariffs: Can India Trust Donald Trump
Insights on the current India-US trade deal
In this episode, author and journalist Puja Mehra speaks to trade policy expert Prof. Abhijit Das about the status of India’s trade negotiations with the United States under the Trump administration. While President Trump had promised 90 trade deals in 90 days, only two have materialised—one with the UK and another with Vietnam—and even those remain light on details. Meanwhile, Indian negotiators are in Washington for another round of talks, and expectations are high. Prof. Das explains what India is hoping to achieve, what makes these negotiations so complex, and why trade agreements with the US are rarely straightforward. He breaks down the behind-the-scenes dynamics, sticking points, and broader implications for India’s exporters and policy framework. Tune in for insights on what’s really going on in the room where the deals (or no-deals) happen.
NOTE: This transcript is done by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on [email protected].
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TRANSCRIPT
Puja Mehra: Professor Abhijit Das, thank you so much for coming again on this show to help us understand the stage of negotiations that President Donald Trump is holding with various countries. It was expected that some sort of interim deal with India would get finalized, that's not happened, but there is still a lot to talk about.
Abhijit Das: Thank you Puja for having me on your podcast. It's always a privilege and pleasure to discuss issues related to international trade with you.
Puja Mehra: Thank you, thank you. Professor Das, I thought you could help us understand what really are the prospects and problems for the interim deal that India and the US are negotiating right now.
Abhijit Das: If we go by news reports, India had made its most ambitious offer to the US about a week or 10 days ago, and it was expected that the interim agreement would get finalized by the 9th of July. That doesn't seem to have happened. Clearly, the United States is desirous of extracting more concessions from India.
And again, if we have to go by the news reports, then the negotiations have been extended, and the negotiators will have a few more weeks to finalise the deal. This might not be too good news for India because it clearly would suggest that India's best offer was not good enough, so the US might be wanting more concessions from India. In particular, the scope of the deal, even if it's limited at this juncture to just goods trade, agriculture would pose particular problems, and all of us are aware that products such as corn, soybean, ethanol, dairy, poultry, maybe even rice and wheat, and issues around GM products would definitely be posing hurdles in finalisation of the interim deal.
In addition, what is also possible is some issues around digital trade, if these are part of the interim deal, those could also be roadblocks in finalising the interim agreement. So yes, the entire basket of problems really centres around agriculture. Some issues could be around the digital economy, if these are part of the present discussions.
And finally, in the manufacturing sector, tariffs on automobiles, those could be the difficult issues at this juncture.
Puja Mehra: Professor Das, I understand that we have to go by what we are reading in the newspapers, and so our discussion is slightly speculative. But could I request you to speculate and tell us what you think could be India's best offer, which does not seem to have cut eyes with the US negotiators?
Abhijit Das: I think India's best offer in respect of these sensitive agricultural products would be to suggest a tariff rate quota, which really would imply that for a pre-negotiated quantity, India might allow imports from the US at lower tariffs. In addition, to protect the interest of farmers, keeping in mind the high level of subsidies in the US, the tariff rate quota offers ideally should also have been accompanied with a floor price of imported agriculture products from the US side. So to my mind, this would have been the best offer from India.
And when it comes to genetically modified products, India's best offer really would not have gone into the realm of allowing imports of GM products. Instead, India's best offer could have centred around proposing that India would put in place a predictable regulatory mechanism for providing approvals to new GM products with very clear timelines. So to my mind, these would have constituted India's best offer.
Puja Mehra: And if at all the digital economy is part of these negotiations at this stage, what do you think would be the best offer there?
Abhijit Das: In the digital economy, since it's a question of creating a vibrant domestic ecosystem, domestic champions, I really don't hold out much hope in India making any offer to the US on issues such as cross-border data flows or server localisation or sharing of government data. There, the flexibility available to the government to negotiate an outcome would be very, very little. In fact, the gulf between what the US may be wanting and what India may have to offer in the digital sector may be far wider than the gulf that might exist in agriculture.
Puja Mehra: On agriculture itself, do you think something like dairy can at all be on the negotiating table for India? Because I think it's politically very sensitive, no?
Abhijit Das: Puja, you're very correct. The dairy sector overall cannot be a subject matter of negotiations. Let's recall that one of the reasons why India walked off the RCEP negotiations was dairy.
Let's also remind ourselves further that when we had negotiated the free trade agreement with Australia, which is a dairy powerhouse, India did not open up its agriculture sector in dairy. However, when it comes to the US, my conjecture would be that the US interest could be confined to very high-end products such as premium cheese. And we may not have too many domestic producers of those premium products.
So, if the US ambitions are confined to the premium products in the dairy sector, perhaps cheese which, let's say, goes into pizza making in India, then there could be a meeting of minds and a landing zone cannot be ruled out. But if the US ambition spills over to, let us say, butter or skimmed milk powder, then those are clear red lines which Indian government would find it very, very difficult to even consider making concessions.
Puja Mehra: And Professor Das, I want to get an overall idea. Given that the goal of the US negotiators is to reduce or eliminate the trade deficit with individual countries, with trade partners, not as a whole, do you think any of these things that India can offer will eventually lead to reduction of India's trade surplus with the US? Because India should not be that problematic, given the scope for defence imports from the US?
Abhijit Das: Again, you are very correct, Puja, that these products may not be that significant in terms of bridging the trade deficit. The trade deficit really will need to get bridged through defence purchases, maybe purchases of energy products. Having said that, while ostensibly the objective of US officials and negotiators would be to reduce the deficit, I think the trade deficit is only a facade, only a leverage.
They are wanting concessions in many other areas, such as intellectual property rights or digital trade. These are the areas which really will not directly be involved in the trade deficit. But these are the areas where the US wants concessions by using the leverage of seeking to bridge the trade deficit.
Puja Mehra: That's a very important point you're making, Professor Das. Are we seeing these signs of the real intentions of these negotiations in the other deals that the US negotiators are negotiating and the deals which are ready for signing or which have already been announced between the US and other countries?
Abhijit Das: We have some hints of it in the UK-US trade deal to the digital sector. We have not seen anything so explicit in the deal with Vietnam. But we just have to wait for a few days or maybe a couple of weeks before the details of the interim deal between India and the US is available.
And if I were to be a betting person, then I would put my money on the possibility of issues like digital being part of the deal compared to the situation where digital is not part of the deal. And also, while intellectual property rights issues may not be part of the deal at this juncture, when negotiations proceed further and we move towards the larger deal at that juncture, it is inconceivable that intellectual property rights will be excluded. So, the task for Indian negotiators is going to be much more difficult even after the interim deal has been signed in the coming few days.
Puja Mehra: And do you think should India offer some kind of concession on say something as sensitive as dairy or any of the other sensitive sectors to the US, that same concession will have to be extended to other countries as well?
Abhijit Das: You are right, Puja. If the concessions which India makes to the US has to be in accordance with the WTO rules, then either India ends up signing a free trade agreement with the US which would require India to reduce tariffs on substantially all trade, which may not happen. So, the second alternative would be to extend the concessions which India gives to the US on a non-discriminatory basis to all WTO members, which again is highly problematic from the Indian perspective.
So, that way India is caught in a bit of a bind in terms of giving concessions to the US and at the same time remaining within the four walls of the WTO rules.
Puja Mehra: So, what you're saying actually helps clarify a lot on what the US administration's goal is. There's a lot of confusion about it around the world. But although they have these ambitious goals, a lot of people are saying that they do not seem to have managed too many deals.
They had said that they would get 90 deals in 90 days. That's not happened. How successful do you think they're going to be?
Abhijit Das: Puja, the possibility of 90 deals within 90 days was almost an impossible target to achieve. But having said that, given the overwhelming dependence of a large number of countries on the US market for their exports and for their economic development, while 90 deals may not be possible, one should not rule out the possibility of at least a dozen deals happening within the next month or so. Hopefully, the deal with India might get finalized by then.
In addition, the deals between the US and some of the other Asian countries might be on the horizon in addition to what has already been achieved by the US vis-a-vis Vietnam. So, 90 deals, impossible. But a dozen deals should not be ruled out.
Puja Mehra: In fact, Professor Das, I feel that it's a slight underestimation of the ability of the US administration to push its trade agenda because 90 deals in 90 days is also probably not possible because of capacity constraints. I mean, they may not have as many negotiators. But like you're saying, if they can clinch these deals with some of the large trade partners, the EU, Vietnam, India, UK, we don't know what will happen with China, that itself should help the US deliver on many of the things that they were wanting to do.
So, it may not be as much of a flop like people are suggesting.
Abhijit Das: Again, you are very correct. It may not be that much of a flop from the Trumpian perspective. What Trump wants is to announce himself as the deal maker.
And if he's able to clinch the deals with the countries that you've mentioned, those would really be important achievements. As far as deals with other countries are concerned, these countries may not have the leverage to resist what the US might be demanding. So, clinching deals with some of the other countries may be less difficult for the US as compared to clinching deals with the European Union or India or even China.
Puja Mehra: And Professor Das, what we're seeing of these negotiations, including with the EU, the EU seems to have prepared a whole package of countermeasures that they would be willing to bring in should the negotiations with Washington fail. If that helps them reach an agreement with the US on what is agreeable to them as well, is that something for India to keep in mind? And also the various negotiations they're having with the UK, with China, with Vietnam?
Abhijit Das: I've always maintained that it was a good idea to start negotiations with the US. But at the same time, the government should also be working with a plan B. If these negotiations do not succeed, then what is the policy response of the government?
From the EU perspective, they have made it publicly known that if the negotiations with the US do not succeed, then there could be a possibility of some retaliatory measures. India has not gone that far down the path, although at the WTO in respect of some of the products on which President Trump had imposed sectoral tariffs, India has reserved its right to impose retaliatory tariffs. But maybe that might not be sufficient.
As part of government's plan B, what would have been relevant, and we don't know whether the government is working or not working on these issues, what might have been useful is to look at some retaliatory action in the intellectual property rights area. That is something which would have created some pain for the US and might have delivered some gains for the Indian consumer, particularly in the pharmaceutical sector. So I do earnestly hope that the government is also actively working on a plan B, because we just don't know when Trump's demands on India might go up, or when Trump might demand that he's not happy with a particular country.
And then even after a deal has been signed, impose much higher tariffs. So the government has to actively keep a plan B ready.
Puja Mehra: He's already threatening a 10% penalty over and above the tariffs he has announced on BRICS countries, because he doesn't like the BRICS. But the reciprocatory tariff at the WTO, the rights that India has, that you mentioned, you're talking about steel and aluminium, right?
Abhijit Das: Absolutely steel and aluminium. And let's also remember that under the first administration of President Trump, when the steel and aluminium tariffs were imposed, after some hesitation, India did impose retaliatory tariffs. So we do have a precedent.
Puja Mehra: I recall. But you were talking about the need for India to have a plan B, should things not go as well as we would like them to with President Trump, which is always a possibility given how he is. But for us to be able to guess what that plan B may be, or even discuss what that plan B may be, we need to know what is India's agenda?
What is it that India wants to get out of these negotiations? We know what the US is trying to get out of these negotiations, but what is it that India is trying to get out of these negotiations? Do we have an idea of that?
Abhijit Das: Let me think aloud on what India should be wanting out of these negotiations. Number one, get rid of the reciprocal tariffs, including the 10% which persists till today. In addition, in some sectors of particular export interests to India, such as textiles and clothing and leather, we must get market access by getting the United States to reduce its existing MFN tariffs as well.
So that must be our objective. Our objective cannot be confined to limiting the damage by getting rid of the reciprocal tariffs. No, our ambitions have to be a bit more because India would be required to reduce its WTO-mandated MFN tariffs.
So we would be granting a huge concession to the US. So it's just fair that the US reciprocates at least in a few key products of India's export interest.
Puja Mehra: Professor Das, there is this whole conversation going on about how President Trump has marginalized the WTO and there are calls all around aiming for a WTO minus the US. Is that a good idea? Is it even possible?
Abhijit Das: Puja, you've picked up a very, very relevant question. We've been hearing over the past four or five months about a WTO minus one. Some of those voices have now gone stronger, suggesting that WTO membership should move ahead without the US.
To my mind, that's not a good idea. You cannot be in a situation where the largest economy is left free to do whatever, is left free to wield the big stick and extract concessions without that country itself even pretending to follow trade rules. So WTO minus US is not a good idea from that perspective.
And from another perspective, it's a terrible idea. It's US today, which is at the receiving end of the ire of WTO members. Let's not forget, for the developed countries and a handful of developing countries, India is equally a bad boy.
They are of the perception that India blocks negotiations. While this perception is completely incorrect, that perception does persist. So it is the WTO minus the US today.
Who knows, it might become WTO minus US minus India a few years down the line. So we should not be setting a wrong precedent by entering into an adventurism, which absolves US from complying with WTO obligations, but mandates that other countries continue to comply with WTO obligations. So in a nutshell, not a good idea for India.
Puja Mehra: And yet, President Trump remains an extremely difficult administration. His administration remains an extremely difficult administration for countries to deal with, given their style, as you have explained. Is there any possibility of getting President Trump to reverse his course on trade?
He does seem to have changed his approach a bit. He's going slow and he's gradually raising tariffs in steps after he was forced to change course by what happened in the bond market a month and a half ago. He's realised that he cannot afford to have a financial crash and that does not augur well.
And he seems to have responded by changing his style, which means that he does respond. Can that be used to get him to change his goals and change his approach?
Abhijit Das: Puja, two factors can prove influential in persuading President Trump to change his approach. One is the pinch that the consumers might feel on account of goods of daily use diminishing and eventually vanishing from the retail shelves. Similarly, if the rich and powerful in the US find their wealth suddenly getting eroded on account of volatility in the bond market or in the stock market, then it can again compel President Trump to have a rethink on his trade strategy.
Linked to these two can be an external stimulus which can contribute to these domestic factors to compel Trump to rethink. And that external stimulus could be the possibility of at least a handful of countries coming together and taking collective action against President Trump. We've seen in the recent statement emerging from the BRICS Summit that without naming the US, the leaders have been critical of countries imposing unilateral tariffs or non-trade measures which violate WTO rules.
So, for the first time, we are seeing a semblance of at least a handful of countries joining hands. Whether this joining of hands deepens, strengthens and gets articulated in terms of specific actions against the US if Trump persists in his ways remains to be seen. But if that were to come about, then there could be a good case for President Trump to rethink his present trade strategy.
And here I do have a hope because Brazil, for a variety of reasons, appears to be in the crosshairs of President Trump. And Brazil has in the past been very nimble, very quick-footed in facilitating creation of coalitions at the WTO. So, if Brazil exhibits a similar decisiveness, similar urgency in getting countries together to act against President Trump, then that would do a huge amount of good to the Global South.
And that is something, again, which would create an additional pressure on the US to rethink the trade strategy.
Puja Mehra: On all three points you've just made, Professor Das, so far we have not seen the consumer complaining much, probably because US companies, importers held inventories and they've also held prices. But eventually, I suppose, something will give in. The stock market is not reacting much now.
Perhaps, President Trump has figured out how to do things in a way where the stock market will not be too alarmed. But more significantly, on BRICS, do you think that the Global South countries or members of BRICS and other potential partners will be able to put a check on President Trump's moves without the weight of their trade partner, such as the EU or even some of the larger countries, other countries?
Abhijit Das: The magic of coalitions in trade negotiations, it requires a handful of countries to take leadership. Taking leadership involves multiple aspects, including being prepared to make sacrifices, being prepared to expend resources in coordinating with other countries. Once even three or four countries take the lead, that sets a very good example that demonstrates to the smaller countries that, yes, there is a safe harbour by aligning themselves with the leaders of a coalition.
I think at this juncture, Brazil is well-positioned to take that role. If Brazil takes that role and if it reaches out to, let us say, the European Union, we could see a new dynamic emerging. We could see forces from outside the US trying to exert pressure on President Trump.
But it will all depend on just two or three countries taking the lead. We perhaps might have reached that point when some of the larger developing countries openly articulate that we have had enough. Now is the time to really, really get President Trump to rethink his trade and tariff strategy.
Puja Mehra: What could be these instruments of applying pressure? We know that China, for instance, has already restricted its export of critical minerals. But what would the other countries do in a similar way?
Abhijit Das: First and foremost, stop exporting some of the critical requirements of US consumers. You might recall the crisis faced by US consumers of eggs.
Puja Mehra: And I think of formulas sometime a few years ago, baby food.
Abhijit Das: Absolutely. Absolutely. So, if some of the largest suppliers decide to withhold their consignments to the US, even for a month or so, no doubt they will have to make some sacrifices.
But that is what will create pressure on President Trump. That is one. Second, of course, China has very clearly and ably demonstrated how it can leverage critical minerals and magnets for getting President Trump to come to the negotiating table and, in a way, reduce the tariffs.
And other instruments could include, let us say, putting restrictions on royalty outflows to the US firms. Further, countries could contemplate not enforcing their domestic intellectual property rights rules in respect of US patent holders. So, it is really a question of just a handful of countries mustering courage and taking decisive action.
But it is not easy. The country has to be prepared for facing a blowback from the United States. But as President Trump has demonstrated, even his blowbacks can be moderated if countries know which nerve to press on the US consumer or of the US economy.
Puja Mehra: So, either way, it looks like a huge amount of chaos, even more chaos we are going to see ahead. But let us also talk a bit about alternatives. You have recently talked of the CPTPP as an alternative to the WTO.
What do you think could India stand on this, given that the NITI Aayog, some senior people there have advocated the same for India?
Abhijit Das: Puja, CPTPP, let us remind ourselves, arose from the remnants of the TPP. TPP was the Trans-Pacific Partnership Agreement, which had very, very onerous provisions, where it was the United States at the lead in the negotiations. So, once President Trump withdrew the United States from the Trans-Pacific Partnership Agreement, whatever remained was implemented by the other PPP members.
And that agreement is called the Comprehensive and Progressive Trans-Pacific Partnership Agreement. Now, the provisions of the CPTPP are very onerous. We are having a very difficult time in agreeing to the concessions which the US is wanting on agriculture products.
We might have to make much deeper concessions if we were to be part of CPTPP and deeper concessions not only in agriculture, even in the manufacturing sector. Are we prepared to do it? I would find it very difficult to say, yes, we are prepared to do it.
In addition, the provisions of CPTPP on issues such as prohibiting export restrictions could put restrictions on the government's ability to use export restrictions as a policy instrument for facilitating downstream value addition, particularly in the mineral sector. The government also has been using temporary export restrictions whenever there is a shortfall in domestic production of agriculture products. The example of onions is very common.
The rules under CPTPP would make it more difficult to impose even temporary export restrictions on agriculture products. These are just a few illustrations. In addition, another issue which comes to my mind is government procurement.
CPTPP has very ambitious commitments related to government procurement, and very, very onerous commitments around digital trade. So, to cut a long story short, the commitments which India might be required to make if it contemplates joining the CPTPP are not in the interest of the country, keeping our future prospects in mind. And given this reality, I don't think those who are arguing for India to join CPTPP have either read the fine text of the agreement or have understood the likely implications of the fine print of the CPTPP.
So, I would really urge those who are advocating that India should join CPTPP, they must first read the text of CPTPP, internalise the text, understand the implications and then come back and give us their considered opinion whether it's India's interest to join the CPTPP.
Puja Mehra: Professor Das, many economists suggest that this is more of an ideological issue because they say that a lot of these concessions that the US is asking for, for instance on GM crops, for instance on dairy etc., India is opposing purely for political reasons. But if India was to shed that reluctance, it would actually be in the interest of Indian agriculture, Indian farmers and similarly in a whole lot of other sectors. So, the real issue here is not India's economic interest but the political constituency that would have to be dealt with.
Is that right? Are they oversimplifying some of these issues?
Abhijit Das: You're very right. Not only are they oversimplifying some of these issues, they are carrying their ideological baggage too far. It is good to say that we must open up our dairy sector but are these economists able to give us alternative employment to literally millions of dairy farmers who will get displaced on account of imports of highly subsidised dairy products which will come into the country?
Let these economists tell us where those alternative employments exist. So, I don't think the difficulties which the government is articulating in terms of opening the agriculture sector are only ideological or political. No.
These are rooted in the hardcore reality of food security, of employment, of poverty reduction, of rural development and to label these as being merely political I think is grossly unfair.
Puja Mehra: Actually, let me refine my point a bit. They also say that some of the reforms that Indian agriculture needs, for instance, they are against these export restrictions as a way of managing consumer prices in India like you give the example of onions. They say that's not pro-farmers.
Similarly, in the case of wheat and rice, they say that the entire structure and framework of Indian handouts and subsidies needs policy reforms and that will be better for consumers as well as better for Indian farmers and also better for government finances. They say that if all of these reforms could be carried out hand in hand with the trade easing that is being sought then it will work. Do you agree with that?
Abhijit Das: Puja, we have to distinguish between two aspects. One is the concessions that we will make to the US and to other countries as part of trade agreements. Second is the need for making domestic reforms.
Now, I completely agree that the present state of affairs in agriculture and manufacturing may not be the best. There is a need to make reforms. No doubt about it.
I have no quarrels with that overall concept. Yes, we have to make internal reforms. But taking the excuse of external commitments for making internal reforms raises huge questions.
Now, the problem in treading this path is that when you take external commitments through trade agreements, you are not in a position to experiment with reforms. You will be totally dictated by your external commitments in terms of how much to liberalise, which sectors to open up over what time frame. You don't have that policy space.
Whereas, if you do the internal reforms voluntarily, autonomous of your external commitments, then you can determine the pace of reform, the depth of reform, the sectors to be reformed. And more importantly, if the reforms go wrong, then the reform measures can be rolled back. So, we have to bear this distinction in mind.
But to say that let's make domestic reforms and also open up, do the two things simultaneously, that is likely to be beset with problems. To give you just one example, let's say we open up our dairy sector and we try to reform the dairy sector. There is no guarantee that our attempts at reforming the dairy sector will succeed.
In fact, our attempts at reforming the dairy sector may become more complicated, more intractable if low-priced imports of dairy products start coming in. So, I am not an ardent advocate of reforming and opening up at one go. We have to undertake domestic reforms first and thereafter open up.
Of course, in sectors where we feel confident that we can face import competition, there we should take the plunge, no doubt about it, there we should open up. But those sectors would be very, very few.
Puja Mehra: I suppose we could have done this after we walked out of the RCEP negotiations. That was the time when we could have initiated some of these policy reforms for agriculture, for dairy, etc. And then we would have been ready by now for these negotiations.
Abhijit Das: It's not that the government has not been taking steps towards reform. For example, the Pradhan Mantri PM Kisan Yojana is an important step towards agriculture reform. But we also have to look at reforming water-guzzling crops being grown in Punjab, Haryana, West and Uttar Pradesh.
That's an area where we urgently need reforms. So, I'm not doubting the need for reforms, but the reforms cannot be mandated through our external commitment. That's my limited point.
And you're very right that we should have started reforms right after we walked off from RCEP. But the government really is going down the path of bringing in some long-term changes and reforms.
Puja Mehra: I agree. PM Kisan, especially if it had replaced the entire subsidy framework, the complex subsidy framework we have, instead of coming on top of that. But it remains a positive step forward.
On that note, Professor Das, thank you so much for coming to the show and discussing all of these issues.
Abhijit Das: Thank you, Puja, for a very interesting and enlightening discussion. I look forward to getting back to your show sometime in the future again. Thank you.
Puja Mehra: Hopefully, once the US deal is done, we will have much to discuss again.
Abhijit Das: Yes.
