US President Donald Trump recently announced a new trade deal with Indonesia, suggesting that a similar agreement with India is currently being negotiated.
Trump’s View on New Trade Pacts
Donald Trump revealed that the US has secured a trade deal with Indonesia, which he claims gives American firms “full access” to the Indonesian market. He stated that the US would pay no tariffs on goods entering Indonesia, while reciprocal tariffs for Indonesia would be reduced from 32% to 19%.
Trump also indicated that India is “working along the same lines” to establish a similar agreement. He emphasized that these deals are crucial for the US to gain market access in countries where, he argued, American businesses previously faced significant barriers.
Inside the Indonesia Deal
The agreement with Indonesia, described by their presidential spokesperson as an “extraordinary struggle” to negotiate, involves more than just tariff adjustments. Indonesia has reportedly agreed to eliminate duties on various agricultural and manufactured goods from the US.
Furthermore, the deal includes significant commitments from Indonesia to purchase American products. These include $15 billion worth of US energy, $4.5 billion in US agricultural goods, and 50 Boeing jets. This comes after Trump had imposed 32% tariffs on Indonesia just last week, even amidst ongoing discussions.
What This Could Mean for India
Should India agree to a deal “along the same lines” as Indonesia’s, experts suggest it could lead to India increasing its purchases of petroleum and agricultural items from the US. Discussions between Indian and US negotiators are ongoing, though no new tariffs have been announced for India specifically.
India Urged to Exercise Caution
New Delhi-based think tank GTRI (Global Trade Research Initiative) has advised India to proceed with extreme caution in these trade negotiations. They warn that Trump’s unilateral announcements often preempt the actual terms of a deal, citing a case with Vietnam where his public statements differed from the final agreement.
GTRI stresses the importance of a jointly issued, written statement to confirm any agreement, rather than relying on verbal assurances or social media announcements. This would help prevent misrepresentation and ensure clarity on commitments.
The think tank also highlighted concerns about the seemingly imbalanced nature of the Indonesia deal, where the US gets “full access” at zero tariffs, while Indonesian exports still face a 19% duty in the US. GTRI warns that a similar lopsided arrangement for India could harm its domestic sectors, particularly dairy and agriculture, by exposing them to duty-free US goods without reciprocal benefits.
Key Challenges in Negotiations
Agriculture remains a significant sticking point in the India-US trade talks, with India maintaining a firm stance on protecting its domestic sector. The US has set an “August 1 cut-off date” as a guideline for countries to speed up negotiations, hinting that non-compliance could lead to a reversion to earlier, higher tariff levels.
- US President Trump announced a trade deal with Indonesia, citing “full access” for US firms.
- He suggested a similar deal is being pursued with India.
- The Indonesia deal includes tariff reductions for Indonesia but also significant purchases of US goods.
- A think tank warns India against a “lopsided” agreement, advocating for a formal, reciprocal deal.
- Agriculture is a major point of contention in India-US trade talks.
India’s approach to these negotiations will be crucial to ensure any agreement serves its long-term economic interests, guarding against deals that might compromise domestic sectors for the sake of a quick resolution.
