*The Deep Dive*

*The Deep Dive* *The US-India Trade Standoff: A High-Stakes Game of Give and Take* *Prologue: A Brewing Storm in Trade Talks* Imagine a tense negotiation between two powerful nations, the United States and India, where a big trade deal is on the line. An economist from East Asia has been watching closely, and he isn't surprised by the recent news: a threat of a 25% tariff from the US on Indian goods, plus pressure over India's oil imports from Russia. This situation, while not final, has been building up, and it raises important questions: Can India reduce this threat, and what will it cost them? This piece will break down why this trade dispute isn't a surprise and what each side wants, making it easy to understand the complex dance between these two global players. *Why This Isn't a Surprise: The Unspoken Realities* It might seem harsh, but the fact that India isn't getting the easy trade deal it hoped for isn't a shock to those who understand how these things work. Let's look at similar situations to understand why. *The EU and Japan Precedent* Think about what happened with the European Union and Japan. They faced a 15% tariff from the US, but eventually got some relief, especially for their car industries. This suggests that a 15% tariff is probably the best India could hope for. But even that seems unlikely. Why? Because to get that lower rate, India would have to offer a lot to the US, and it seems unwilling to do so. *Trump's Tactics: A Threat or a Promise?* This 25% tariff threat is similar to what former President Trump did with Japan before they agreed to a lower number. It's a tactic, and whether it's a real threat or just a bargaining chip is up for debate. But one thing is clear: Trump cares enough about these issues to talk about them publicly. *What Trump Wants from India* President Trump has a few key goals he wants India, and its leader Prime Minister Modi, to help him achieve. *Ending the Ukraine War and Russian Oil* One major goal is to get India's help in ending the war in Ukraine. However, India isn't very interested in getting involved. As a developing country, India buys oil from wherever it's cheapest, and right now, that's Russia. Trump wants to cut off Russia's oil money, but India doesn't want to stop buying the cheapest oil available. For India, Russia is neither an enemy nor a close friend. While Russia might be seen as an enemy by Western countries, India doesn't share that view. So, on this point, it's very difficult for India to agree. The cost to India would be having to pay more for its oil if it stops buying from Russia. Trump's tariffs are adding to these costs. *Opening India's Massive Market* The second thing Trump wants is to be able to proudly say that he has opened India's huge market to American businesses. He sees this as a win-win situation for both countries. India has shown some willingness to open up its markets, as seen in its deal with the UK. However, India is doing this at its own pace – very slowly and only in certain areas where it feels its own industries don't need protection, like ultra-luxury goods, and with small limits on imports. So, when it comes to cars, Trump isn't making any progress. This means the 25% car tariff will likely stay. For India, it might not be worth giving up too much of its own market if it doesn't export much to the US anyway. India might offer a bit more than it gave to the UK, but the UK deal shows that India wants to keep its domestic car markets protected. *Agricultural Access: A Tough Nut to Crack* On the farming side, the US wants to sell more of its main products like soybeans and corn in India. But this is also proving impossible. Why? Because India doesn't want to upset its farmers, who make up the majority of its population in terms of voting power and employment (about 40% of all jobs). So, on this issue, both sides are stuck. India could potentially offer to buy palm oil from the US instead of Indonesia, but there's a reason they buy from Indonesia in the first place (likely cost or existing trade agreements). Regardless, this particular issue is very difficult to resolve. India could also offer a large investment or purchase package to the US. However, this isn't typically how India operates. So, the detailed discussions are where the negotiations get stuck. *India's Unique Position: Not Like Vietnam* India is not like Vietnam, which might be more willing to make concessions to gain access to the US market. India has a massive domestic market that is valuable on its own. But giving access to that market comes with costs, and what Trump is asking for is forcing changes on a country that traditionally avoids taking big political risks. While India's willingness to take risks has grown, it's still not enough for these demands. *What Happens Next?* So, what's the outlook? The economist believes that this 25% tariff threat and the pressure over Russian oil might not stick. Or maybe they will. Either way, there's some room to reduce the tariff. The big question remains: Is it worth it for India if the best deal it can get is something closer to the 19% tariff rates seen with countries like Indonesia or the Philippines? *Epilogue: The Unfolding Trade Saga* As the trade talks continue, the tension between the US and India highlights the complex realities of global commerce. It's a delicate balance between economic interests, political agendas, and national priorities. The outcome of these negotiations will not only shape the future of trade between these two giants but also offer valuable lessons on how nations navigate their differences in an increasingly interconnected world. The world watches to see how this high-stakes game of give and take will conclude. *Credits: The East Asia Economist*