Modi-Trump Talks: 5 important points

Despite the hype, Indian Prime Minister Narendra Modi’s first visit to Washington under Donald Trump’s second term is not surprising at work visits that lack the dignity of a national visit It was.

Trump has announced an increase in U.S. military sales from 2025, including F-35 jets, to India from 2025, and an increase in oil and gas exports to narrow the trade deficit. Both sides agreed to negotiate trade contracts and complete a new defence framework.

He also confirmed that the US has approved the extradition of Tahooul Rana, a Chicago businessman accused of playing a role in the 2008 terrorist attacks in Mumbai.

“It’s a lot of work for the administration in less than a month,” Michael KGelman of the South Asian Institute at the Wilson Center in Washington told the BBC.

“Overall, both sides seem comfortable continuing their Biden-era collaboration, especially in technology and defense, but many will be rebranded under Trump.”

Still, the major challenges lie ahead. This is the key point:

Modi’s visit came when Trump ordered US trading partners to face mutual tariffs – import taxes rival similar obligations already charged by American exporters. He ordered advisors to draft a wide range of new tariffs for US trading partners, warning that it could take effect by April 1st.

India enjoys a trade surplus with its top trading partner, the US. India has reduced average tariffs from 13% to 11% in its federal budget to pre-empt Trump’s tariff moves.

The judges have come out on whether India appears to be causing tariff shocks for now.

Ajay Srivastava, founder of the Delhi-based think tank, Global Trade Institute (GTRI), says there is no “customs related to tariffs.”

The main reason, he says, is that 75% of exports to the US to India attract import taxes of less than 5%.

“Trump points to tariffs of extreme outliers like 150% of certain items, but that’s not the norm. India has little reason to fear mutual tariffs,” Srivastava told the BBC. He spoke.

Abhijit Das, former chief of the WTO Research Centre at the Indian Institute of Foreign Trade, is not convinced.

“The devil is in detail. Mutual tariffs do not only reflect Indian import taxes. Other factors will arise,” he told the BBC.

Trump’s approach may take into account value-added tax (VAT), non-tariff barriers and trade restrictions beyond import operations. The Indian Goods and Services Tax (GST) on Imported Goods is consistent with WTO rules, but Trump may use it to justify higher tariffs.

The US government’s memo on mutual tariffs suggests this strategy, citing costs to American companies from non-tariff barriers, subsidies and burdensome regulations abroad. It also cites VAT and government procurement restrictions as non-tariff barriers.

DAS says the US is expected to promote access to the Indian government procurement market, which is currently protected under WTO regulations.

“This hinders the ability to prioritize domestic producers in India and poses a direct challenge to the ‘Indian Make-up’ initiative. This certainly isn’t good news for us. ”

DAS said India should counter Trump’s mutual tariff logic, particularly in agriculture where the US imposes strict non-tariff barriers to limit India’s exports, such as the limit on hard maximum residues of chemicals. It suggests.

He argues that India should highlight these grants to oppose American claims, as the US will “heavy subsidize” its agricultural sector.

Tariffs alone may not help fill the trade deficit between the two countries. Defence and energy purchases go in some way to deal with the deficit, experts say.

The new $500 million (£400 million) trade target aims to more than double the $190 billion trade between the two countries in 2023.

Modi and Trump have pledged to negotiate the first phase of the trade agreement by fall 2025. The consultation will focus on market access across products and services, tariff reductions and supply chain integration.

“The announcement that both parties will pursue a trade contract gives India the opportunity to negotiate to reduce tariffs on both sides, which benefits not only the US-India relations but also the Indian economy that has been booming in recent months. ,” Kugelmann said.

What’s not clear is what kind of trade transactions both parties are aiming for.

“What is this trade agreement? Is it a completely blown free trade agreement or a mutual tariff agreement?” Srivastava wonders.

DAS believes he will have to wait for details on the trade agreement.

“That doesn’t necessarily mean free trade transactions. If so, it would have been stated explicitly. It could simply involve tariff reductions on some products of mutual interest.”

Priyanka Kishore, the leading economist at Asia Decode, a Singapore-based consultancy, says $500 million is a tall target, but there are low fruits that can be exploited immediately.

“For example, US sanctions on the Russian Shadow Fleet will begin soon, so India can easily turn to the US for more oil. This isn’t too difficult.”

Trump said at a joint press conference that he hopes the US will become India’s number one oil and gas supplier.

Defensive trade with the US with India has skyrocketed from near zero to $20 billion, making the US the third largest arms supplier.

Russia remains India’s top source, but its share fell from 62% to 34% (2017-2023) as India moved to US sourcing.

In a major announcement to deepen defence bonds, Trump said the US will increase sales of military equipment to India “only billions of dollars, billions from this year.”

But this would be easier said than done, experts say.

“This sounds good, but it could be when you put your cart in front of the horse,” Kugelman said.

Despite the rise in sales of US arms sales to India, bureaucratic hurdles and export controls limit the transfer of sensitive technology, he says. The new defense framework announced at the summit may help address these challenges.

India has also “not taking the offer of the F-35 seriously” due to the high demand for maintenance, says Ajay Shukla, a strategic issue expert.

Shukla points out that the US arms trade has its challenges. Private companies prioritize profits over long-term partnerships.

However, Delhi’s defense is set to deepen the US defense as it is being treated with Russia due to delays and cost overruns affecting some of India’s weapons.

Modi met Tesla CEO Elon Musk to discuss AI and emerging technologies, India’s Foreign Ministry said.

It is unclear whether they addressed Musk’s stalled plans for Starlink’s India launch or Tesla’s entry into the market.

Musk clashed with Indian billionaire Mukesh Ambani, who supports the auction, seeking direct spectrum allocation. His license remains under review.

India has also courted Tesla to establish an automotive factory, cutting import taxes for automakers that have committed local production by $500 million within three years. Tesla has not confirmed plans yet.

In a rare move, Modi joined Trump at a press conference to answer two questions – illegal immigration and the US Department of Justice (DOJ) on bribery liability for Adani Group.

Indian billionaire Gautam Adani, accused of close ties with Modi, was accused of fraud last November over a $250 million bribery scheme.

Modi said he had not discussed the issue with Trump. Regarding immigration, he said India is ready to recapture the confirmed illegal Indian immigrants.

This was Modi’s third direct reporting Q&A in his nearly 11 years of tenure as India’s prime minister. He has never had a solo press conference. In 2019 he sat beside then-Party President Amit Shah, so Shah answered all the questions and in 2023 he asked two questions along with former President Joe Biden.