Impact of Trump's tariffs not yet known; India engaged with US to seal trade pact: EAM

New Delhi: The impact of US President Donald Trump’s reciprocal tariffs is not yet known and New Delhi’s strategy to deal with the situation emerging from it is to seal a bilateral trade pact with Washington by fall of this year, External Affairs Minister S Jaishankar said on Wednesday.

The external affairs minister’s comments came hours after Trump’s 26 per cent customised reciprocal tariff on Indian imports kicked in.

In first detailed response to the US policy on tariff, Jaishankar said India is perhaps the only country to reach an understanding with Washington to firm up a trade deal after Trump assumed the presidency for the second time.

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Trump’s sweeping reciprocal tariffs against dozens of its adversaries and allies came into effect on Wednesday triggering massive trade disruptions and fears of a global economic recession.

India is among the countries that have adopted a cautious approach in reacting to potentially seismic action, saying it is engaged with the Trump administration on the bilateral trade agreement (BTA).

“I don’t think it’s possible to speak about what would be the impact, because we don’t know. What is our strategy? I think that’s pretty clear,” Jaishankar said at News 18 Rising Bharat Summit.

“We decided that we will engage the Trump administration early on this set of issues and we were very open with them, very constructive with them as they were with us, and what we agreed to do was to try to negotiate a bilateral trade agreement by fall of this year,” he said.

Following talks between Prime Minister Narendra Modi and Trump in Washington DC in February, the two sides announced that they would negotiate the first tranche of the BTA by the fall of 2025.

“I think we are the only country after President Trump has assumed presidency the second time, which has actually reached such an understanding in principle,” Jaishankar said.

He said every country in the world today is fashioning its own strategy to dealing with the United States and that India’s goal is to strike a trade pact with the Trump administration.

“In our case, our strategy has a goal. And the goal is to see whether it’s possible to actually deal with this situation by concluding a bilateral trade agreement. And I should add that in an interesting way, this has long been our objective,” he said.

Jaishankar said the “present situation” may have created the circumstances for such a serious conversation on the trade deal.

“But if you look at President Trump’s first term, we were actually negotiating a trade deal which could not fructify, and if one looks even at Biden’s administration, we discussed trade possibilities and we ended up with the IPEF initiative,” he said.

In line with Washington’s long-term vision for the Indo-Pacific, then US President Joe Biden launched the ambitious Indo-Pacific Economic Framework for Prosperity (IPEF) in May 2022.

It was an initiative aimed at deeper cooperation among like-minded countries in areas like clean energy, supply-chain resilience and digital trade.

“They (the Biden administration) were very averse to doing a bilateral agreement. From the Indian perspective, actually working out something bilaterally with the United States is not at all a sort of a negative or a sort of an unwanted situation,” Jaishankar said.

“On the contrary, it is something which has long been our objective,” he added.

Talking about India’s engagement with European nations in the middle of the Russia-Ukraine war and the US tariffs, Jaishankar said it has been New Delhi’s endeavour to have negotiations with Europe on a free trade deal.

“I am pretty confident that just as we are seeing a very intense engagement with the US, and by the way, with the UK as well, I expect the pace to pick up with Europe,” he said.

“We have an aspirational goal. We’d like to close out the FTA this year,” he said.

Asked if India can conclude a trade deal with the US by the fall, Jaishankar did not give a direct reply.

“I have always wondered why it takes such a long time. Frankly, I’ve never figured it out…because I see we have trade negotiations which have been going on for decades,” he said, referring to negotiations with the European Union (EU) and the UK.

“If I were doing a negotiation, I’d be at it till I got the job done,” he said.

There have been more discussions with the Americans in the past six weeks than with the EU in the past two years, he added.

Jaishankar said instead of attributing everything that is happening to Trump’s actions, matters should be seen from an Indian perspective as all the major free trade agreements (FTAs) concluded in the past 30 years were with competitive economies to the east of India that resulted in trade deficits.

Jaishankar said natural growth potential for exports are in countries to the west of India such as West Asia, Europe, the UK, the US, and Latin America.

These should be the priorities in India’s own interest, and “not because some president of another country has created a situation”, he said.

“I think there’s a very serious message coming out of Europe saying we want to move forward on this. We welcome it, we reciprocated and I am pretty confident that (we) expect the pace to pick up with Europe, we have an aspirational goal,” he said.

“We’d like to close out the FTA this year,” Jaishankar said.

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