Will Trump’s New Tariff Threat Derail India-US Trade Deal? All You Need To Know

Added: 2026-06-03

[00:00:11]Hello and welcome. I'm Vicramosa. This is the big question. At a moment when India and the United States are getting closer than ever before to seal that first branch of a long- aaited trade agreement, the final stretch has become a speed bump of sorts. On one hand, you have the negotiations that have been moving at speed. direct engagements between commerce minister push goal and the US trade officials that have been ongoing. The US envoy saying that 99% of the deal is done and both sides have been working to close the gaps. But just at that finish line comes uh this fresh salvo if you can call it that from Washington. They've introduced a new pressure point. This is section 301 of the US trade act. So now with 301, the Trump administration is proposing additional tariffs of up to 12% on countries which of course include India.

[00:01:05]They're alleging gaps in preventing goods that are linked to forced labor from entering the global supply chains.

[00:01:12]Now this section gives the US sweeping powers to unilaterally impose tariffs on what it considers unfair trade practices. and it was the very weapon that was used by the Americans against the Chinese in their ongoing trade war.

[00:01:27]So public hearings are scheduled, the tariffs are not yet final, of course, 12% is still out there, but it is a threat. So question is why raise this now when talks are at their most sensitive stage. Is this about compliance? Is it leverage in negotiations? Because the truth is that the final 1% of this deal is where the real friction lies. The key choke points they're well known it's market access for American goods into India especially agriculture tariff structures on manufacturing and autos another choke point there are about rules that surround data technology and IP protections and of course India's long-standing push for tariff relief and and fair treatment under US trade laws like section 301 like we were talking about. So here at the same time back home India is reccalibrating our own strategy expanding our board of trade.

[00:02:21]Look at the kind of names over there you have MDC of Tata Motors EV Anish Sad the managing director of Mahindra and Mahindra CSTI the chairman of SBI. These are the industry heavyweights that are uh being brought together in that uh trade board to sharpen India's export competitiveness and position India much deeper in global supply chains. But then rising protectionism that's happening globally, increasing transactional trade, the kind that Washington is pushing for, all of these could complicate India's ambition when it comes to exports. So tonight the big question is not just about a a 12% tariff that we are looking at the prospect of it. Now the question is is the US using tariffs as a negotiating weapon and is India being pushed into a corner in the final phase of this deal and should New Delhi compromise to secure a strategic partnership or should we hold firm on the core economic interests which is why the big question tonight that we are tracking the speed bump that we're likely to see because of uh not just the 12 1/2% tariff threat but now that we are so close to striking a deal how is this going to help us leverage our own position. How much should we push? How much should we compromise? Let's let uh let's just take that across to our panel. And joining us this evening, we've got some excellent guests, former diplomat and former ambassador to the United States, Mira Shanka is with us along with the former ambassador to the World Trade Organization, Jandas Gupta. They're joined by the former Union Secretary in the Ministry of Commerce and Industry, Ajay Da. And Sajay Gupta is also with us. He is the treasurer of the AllIndia Rice Exporters Association. Thank you all for making the time for the big question and I'd request you to really jump in at any point in the debate. If you want to make a counterpoint at what is being said, just raise your hand and I'll come to you quickly. But let me ask Mr. Das Gupta first. Mr. Dask Gupta, the Americans, they are invoking section 301. They're proposing tariffs of up to 12% on India and this is over alleged forced labor gaps. How significant is this legally speaking? How significant?

[00:04:28]and does it really fundamentally alter the power balance in the trade negotiations that are ongoing >> of uh background to this uh as you know the US Supreme Court struck down the president's directives to impose taxes arbitrary import taxes on different countries and uh then uh under section 122 of the trade expansion act. The US president imposed 10% tariffs across the board on all countries. Now the US is taking the stand that countries which entered into some kind of an agreement or reciprocal uh trade arrangement uh including India which had negotiated an 18% flat tariff on all products. They will uh have to abide by that agreement.

[00:05:25]So that is one thing. The point is that on July 24th, this section 122 10% tariffs are going to go away because they were there only for 150 days.

[00:05:38]>> Correct? So the problem is that uh the US wants to take back the initiative and impose taxes and or compel countries to go back to what they had negotiated before the US Supreme Court had struck down this uh you know arbitrary tariffs right >> so that is what they are now going to wield the big stick >> that either you take this 18% tariffs in case of India that is my conjecture >> okay or we will impose 12 1/2%. Un additional tariffs. So you will be back to square one and you will have to face this tariff threat. So better settle with us, have this agreement, give us market access and uh sign this deal.

[00:06:24]>> So happening all of this happening at a very crucial time Mr. Da we being told the deal is 99% done. That's what we are hearing from Mr. Gore. So what exactly is stuck in that final 1%? Is it just section 301? Is it about the Americans pushing India in the final stage? Are these tariffs and market access really the sticking points only?

[00:06:48]>> Vicram, no one would can say with certainty what are the sticking points because nothing has been disclosed by the government or the government or the US team. So either side they are quietly talking about what's happening. But if it was 90.9% con agreed to and only 1% remains then I think there should be no problem at all in our coming to a agreement at least on what's been called the first branch of the agreement wherein and the second branch which is the larger agreement coming in much later and my so it's only conjectures and my conjecture is and it has been reported in the press as Well, that there are three issues about which the talks have yet to come to an agreement.

[00:07:42]One is the India's red line.

[00:07:44]>> Yes.

[00:07:44]>> Which has been for a long time that we don't want to give access to the US in agriculture, dairy and almonds and walnuts. Something which the US has been wanting for a long time. In addition, it seems the US has also raised the issue of data protection that the data which is collected in India by the US companies, we want it to be stored in India. Digitization will suffer, innovation will suffer.

[00:08:16]Those are the and global innovation will suffer. Those are the kinds of arguments being put forward by the US and it'll make it expensive for the US companies if they were to store data here and thereafter use it. And a final point which has come up in the US and that was expected. And I was wondering when would they raise it because for a long time the US for at least 30 years they've been raising the issue of IPR protection in in not been to the international level and they have always kept us in the gray zone which was saying we keep you under a watch.

[00:08:53]>> So these two or three things to my mind are holding up the discussion that it could that's why I say it could be well more than 1%. So these choke points have existed but now the timing of 301 is striking. Mira Shankar, what do you say?

[00:09:06]Why introduce tariff threats at this final stage of talks? You think this is a negotiating tactic or do you think it's a signal of a of a more hard-nosed American trade posture at this stage?

[00:09:17]Well, you have to go back into the history of the tariffs. After the US Supreme Court struck down the reciprocal tariffs which the Trump administration had imposed on different countries, uh Trump imposed a 10% universal tariff on all countries. that too was struck down by a trade court but only with respect to the petitioner not for all but it held that it was illegal and didn't apply for the petitioner. So now the Trump administration has been looking for other tools >> under which higher tariffs could be imposed and section 301 of the US trade act gives them the ability to launch investigations into what they consider unfair trade practices. And if the investigations uphold that there is uh unfair trade then uh tariffs can be >> so ma'am how do you correlate this how do you correlate it with China because they aggressively use the same section against them >> may yes well right now these section 301 tariffs have been applied against 30 countries >> on the issue of forced labor not having enough protection to prevent forced labor imports. Now out of these 54 countries have 12% additional tariffs. That means in addition to the 10% which will lapse in July uh and uh another set of countries have 10%. And these are countries which are believed to have sufficient uh uh protection against forced labor imports or who have made commitments under bilateral agreements to prevent forced labor imports. Now for interestingly from India's point of view, China has the 12%.

[00:11:28]But Pakistan and Bangladesh and Indonesia all potential competitors have 10% uh additional tariff under this set of uh tariffs which have been imposed. Yes, >> these are not the final tariffs. There will be hearings till July 7th and uh there will also be written submissions and then a final pronouncement will be made. Correct. So India remains engaged with both the special 301 investigations and the trade negotiations bilateral trade negotiations. So right now I would say that the it is intended to really uh put in place alternative tariffs since Trump's tariffs which 10% tariffs will lapse.

[00:12:21]>> Yes. But this is not the only sticking point. One sec. One sec ma'am. But this is not the only sticking point. Mr. Da India has drawn that red line on preferential access as well. How difficult is it going to be to reconcile that with American demands for deeper market opening especially in what ma'am is suggesting in agriculture in manufacturing? How do you see that >> Mr. Let me just but let me just make one observation before I answer.

[00:12:48]>> Sure. Sure. Sure. Yes.

[00:12:49]>> I think the first transfer of the agreement is somewhat different separated from the investigation under 301.

[00:12:57]>> Okay. Section 301 has been applied to 60 countries, 60 economies of the world soon after the IE act setback which was which it the US president received from the Supreme Court. The causes are different in the case of India. Two which have been pointed out are one is the question of forced labor that we are not taking action to pre prohibit that and it has they have even mentioned it is in the supply chain of textiles and apparel exports from India.

[00:13:35]So that becomes fairly clear what they are wanting saying and they US has been raising these issues at various foras.

[00:13:43]It has come up Jen will tell you that this issue had also been raised in WTO by several countries including that included even Germany at one point of time. The question is the those 301 let me also make it very clear can be applied even after the first branch of the agreement has been signed or even the second branch because that gives that is a part of the firepower which the US administration has given to its president. Fair enough.

[00:14:13]>> It can be applied irrespective of the agreement. See the agreement between United States, Mexico and Canada. Now, President Trump has been his levy duty is on steel. His levy duties outside the framework of the agreement under some of these powers which is which he's got what was called the I think smoth act or later 1974 act of the US government.

[00:14:39]Yes. The >> point I'm just trying to make is the 1% or more whatever it is, it applies with respect to the points which are not acceptable to us.

[00:14:52]>> Correct.

[00:14:53]>> And some of them are not acceptable to the US to resolve those 301 will continue if not under 301. President of the United States has as Jeffrey Sax said on television in another channel Indian channel just yes just yes just yes just yes just yes just yes just yes just yes just yes just yes just yes a day before saying the firepower with the armory of the US president is fairly strong and extensive so >> yes this is true but >> yes but meanwhile for exporters I wanted to get in Sanjay Gupta's perspective Mr. I'll just come back to you for exporters especially sectors like rice and agri commodities this kind of tariff threat it could be 10 to 12 a 12% what does it actually mean in terms of competitiveness in terms of margins Mr. Oh uh primarily I according to me this is the negotiating tactics of the US but uh what is this tactics like it it means some something is not clearly between the trade agreements like uh some issues which it was uh between India and US it was there still is there for the exporters I am I'm from the exporter side or especially the rice exporter sides >> I'm Just clearing you one thing for exporters like us it's a any any any kind of uncertaintity is prolonged affects our contracts pricings and the future dealings even if we are talk talking about the competitiveness like Pakistan we are the exporter of the basmati rice and now the today the US is one of the biggest market of the basmati rice >> yes >> is almost we are exporting around 300,000 metric ton basmati rice right now is exported to us and who is our main competitor our main competitor is the Pakistan what happened now today the the duty on the Pakistani rice is 10%.

[00:16:50]>> Correct.

[00:16:51]>> Okay.

[00:16:51]>> Yes.

[00:16:51]>> And if if this duty is going to be 12.5% on us on Indian basmati rice how we are going to be competitive with the Pak in the compared with the Pakistan. So definitely if this thing is happen the Pakistan will be the winner and Pakistan will take the advantage of this one. I don't know that our government what is going to be do but like agriculture sectors and the dairy sector is the two main sector where is the main issue is concerned from the US side also.

[00:17:21]>> Yes absolutely there is no doubt about that. So in terms of global competitiveness that's something that India is building right now. So with global supply chains already under stress, I'm wondering how much more vulnerable Indian exporters are to sudden policy shocks like this and whether we are likely to see the choke points which is of course like we are mentioning agriculture, auto is one part, tariffs, data, IP all of these are the choke points can all of these realistically be resolved in one deal or are we overestimating how close we actually are? Mr. Gupta >> uh the US ambassador statement that only 1% remains to be bridged. I think that is a bit of an overstate.

[00:18:06]>> Okay.

[00:18:06]>> There are as Dr. Dwa has mentioned there are a host of issues which uh of course uh the details have not been diverged by either the Indian side or the US side >> but these are very difficult issues to negotiate.

[00:18:22]uh for instance the GM food issue the whole of agriculture almost and then dairy including dairy products of course and uh uh lot of industrial products as well. So uh there will have to be negotiations but one of the things which the Indian side had stressed is about fair equitable and balanced and there was uh talk of reciprocal access which means that the US will have to lower its tariffs and market access requirements for India visa v other competing countries. Now that is something on which the US has not been forthcoming at all. So if the Indian government decides to keel over and accept uh 18% or 12% of uh this 301 then it would be not at the cost of uh it would be at the cost of you know giving away uh our uh uh you know market uh for no gains except for the fact that the US would allow us to keep exporting at slightly higher levels than Pakistan, Indonesia, Bangladesh and many of our competitors. So it is a difficult choice for the government to make at this juncture.

[00:19:34]>> So Mir Shankar where do we stand on that leverage point?

[00:19:39]>> Yeah. You want to finish that point? Go ahead sir.

[00:19:41]>> Yeah. Just one point I wanted to mention is that this 301 has been termed as uh not in conformity with the WTO because the WTO has trade defense measures which are codified and which have been adeared to by all countries. Right >> now, US has used 301 in the past also.

[00:20:01]They have been struck down. Now, this threat will keep on hanging on not only India but other countries as well that the US president can initiate an investigation which is to be determined by the USR who's a part of the US president's cabinet and he can impose any any kind of tariffs. So this threat will always be there irrespective of whether we enter into an agreement or we don't enter into an agreement. So the threat if it stands right now how much leverage do we have? Mira Shanka India of course on its part is expanding its board of trade pushing exports. Can that domestic push offset the kind of rising protectionism that we seeing globally and definitely by the Americans?

[00:20:42]>> Well, I think there are two things. Yes.

[00:20:45]One is definitely that uh a trade deal does not preclude special 301 action because if you see the EU and the US have a trade deal but 10% has been imposed on the EU and UK under this special 301 investigation. So a trade deal will not preclude against future 301 action. Secondly, there is a second 301 investigation uh regarding India having built excess capacity in areas such as solar panels and steel uh which is also ongoing. We don't know what the result of that will be. Thirdly, you know, even though the framework agreement was one-sided with the US seeking uh reductions or zero duties across the board for their industrial products and giving India an 18% tariff as opposed to a 3.5% tariff which applied under the MFN WTO agreement.

[00:21:49]uh India was still willing to accept it because you had a marginal advantage of 1 to 2% against other Asian developing countries who had 19% or 20% tariffs including Pakistan, Bangladesh, Indonesia, Vietnam. Now we do not know what the relative weight or advantage of tariffs for India is going to be because there's no clarity about US tariff policy at the moment.

[00:22:21]>> Right?

[00:22:22]>> So uh to actually jump into an agreement without this clarity would mean locking yourself into an unequal deal without even the benefit of relative advantage.

[00:22:35]>> What is the risk there ma'am? What is the risk?

[00:22:37]>> I think the risk is uncertainty for your exporters. But that uncertainty right now applies across the globe.

[00:22:45]>> Right?

[00:22:45]>> This 12% has been imposed on 54 countries including India. And then there are another set of 14 countries who have had 10% imposed which include UK, EU, uh Pakistan, Bangladesh, Indonesia. So some are your competitors.

[00:23:05]that means they already have a 2 and 12% tariff advantage over you. So how is this going to play out? Is there something we can do to you know um adopt laws for prohibiting the import of products made with forced labor? That is one thing. But we I think what we have to do is to continue being engaged with the US both on 301 and on the bilateral side not sign off on the deal. That's what you're saying. Don't sign off on the deal just yet.

[00:23:38]>> Without being rushed into a premature agreement till there's clarity on these points. Mr. Daive advantage.

[00:23:45]>> Mr. Da, what do you say? If India agrees to concessions now, do you think we risk setting a precedent for future negotiations with the US even other countries?

[00:23:54]>> Let me put it slightly differently, Mr. Roja. I think the US is by launching this 301 investigation against 60 economies of the world and that includes Vietnam.

[00:24:09]Vietnam as you know has is the number two that export surplus of Vietnam visav US is just after Taiwan. Taiwan has the maximum export surplus then Vietnam then China and fourth is Mexico. Even against Vietnam, US has initiated this 301. US has at the same time it has delayed signing of the bilateral trade agreement with with Vietnam. So it should have been signed it was agreed to earlier at a particular I think the rate was 10%, correct? Was agreed but it's not been one it's not effect finally signed. Second 301 is going ahead. But the delay as far as I know is not from Vietnam side. Correct. That delay is from the US. Yes. Because wants to complete the 301 action come to a conclusion before the 20th of July when the 150 days for living the power.

[00:25:15]>> That's the American side. How much should India concede ground? Mr. Daz Gupta. Bottom line. Should India fast track this deal despite the tariff threat or should we hold firm even if it is going to delay the agreement?

[00:25:27]>> I'll be very blunt. This is something which will come to haunt us in the future also if we concede. So I think we have to stand firm. We have to act tough and we have to ask for reciprocity. If the US doesn't give it, it had already affected our exports in the last uh year. So, so be it. We will have to take that pain. And despite that, our exports have gone up uh quite a bit. Correct.

[00:25:54]And mind you, uh our exports in goods have been stagnant at around $440 billion for the past 3 4 years. It is in services that we have been going ahead at a fast clip and the US is not imposing any restrictions on our exports of services. of course apart from the H1B visa issue and movement of >> natural persons. So I think we have to stand firm and also for the sake of our own uh domestic sectors and constituents including uh the manufacturing sector we just can't give up on this because the US is wielding a big stick in the form of 301. It had always had this power since 1974.

[00:26:41]>> Very true. We have to stand firm.

[00:26:43]>> We have to stand firm. The deal may be 99% done, but in trade negotiations, like we know, it's always the final 1% that is going to define the outcome. And what we seeing right now, a clear shift.

[00:26:52]The United States willing to use tariffs not just as policy, but as leverage.

[00:26:57]That's obvious. But for India, this is a test, a test of strategy. Do we close the deal quickly, secure strategic alignment, or do we hold our ground on the core interest from agriculture to tariffs to policy sovereignity? Because the reality is quite obvious. A strong trade partnership cannot be built on pressure tactics alone. It has to be balanced. It has to be predictable and it has to be mutually beneficial. I want to thank Jandas Gupta, Jay, Dua, Mirra Shankar and Sajay Gupta. Thank you for joining us sharing your perspectives on what is clearly a very important uh debate and an important discussion that India is having with the US as well. And for our viewers, of course, the line is quite clear. Yes, we are very close to a trade deal, an important one for India when it comes to the United States for the kind of partnership in trade that we have with them. But to be able to do it with the kind of leverage that Americans have and how much ground to concede and how much to hold firm on, those are going to be deciding the future course of India's trade policy and where we stand in the global economy. I'm from me and the team on the big question. Good evening.

[00:28:16]Heat.