US Tariff Cut & EU Deal Signal Major Shift in India's Trade Diplomacy

Speaking to ANI, Sachdev said the US decision to reduce duties from a peak of 50% to 18% has removed a major irritant in bilateral ties, which had strained relations since April's Liberation Day announcement by US President Donald Trump. India had initially faced a 25% reciprocal tariff, followed by an additional 25% levy linked to its purchase of Russian crude.

"These decisions were unilateral and ran counter to the spirit of rule-based international trade that the WTO was meant to uphold. Despite this, India refrained from imposing retaliatory tariffs, choosing instead to exercise strategic restraint," Sachdev noted.

"While the reduced duties remain significantly higher than pre-April levels, when Indian exports faced average tariffs of 2-3%, the cut restores a level playing field, as competing countries now face similar or higher duties. This has alleviated the comparative disadvantage Indian exporters endured over the past year," he said.

Sachdev said the trade tensions had cast a shadow over two decades of steadily improving India-US relations, which had been underpinned largely by economic ties. The US is India's largest trading partner and export market, with India running a modest goods trade surplus of over USD 40 billion.

However, Sachdev pointed out that this surplus is offset when services are accounted for, with US technology and digital companies earning billions of dollars from the Indian market.

"Relations further deteriorated amid sharp rhetoric from the Trump administration, including remarks describing India as a dead economy. India largely bore the brunt of criticism from U.S. officials, media, and social platforms, an experience that has left lingering mistrust," Sachdev said.

Geopolitically, the tariff rollback creates space to rebuild ties, but uncertainties remain. "The unpredictability of Trump's approach has made the US appear less dependable," Sachdev said, adding that long-term strategic trust will take time to restore.

The joint statement accompanying the tariff reduction also signals the start of negotiations for a bilateral trade agreement (BTA), intended to replace the current short-term arrangement.

While the U. has implemented tariff cuts immediately, India has made no binding commitments to reduce its own duties or halt imports of Russian crude yet, instead emphasising its energy security needs for a population of 1.4 billion.

The easing of tensions with Washington comes as India concludes what has been described as a "mother of all deals" with the European Union, underscoring a broader diversification of trade and diplomatic partnerships. According to Sachdev, the year-long crisis with the U.S. has made India "more mature and light-footed" in its foreign policy.

"This episode reinforced the idea that there are no permanent friends or enemies in diplomacy," he said, pointing to India's renewed engagement with China, continued energy ties with Russia despite Western pressure, and accelerated pursuit of trade agreements with the EU, Gulf Cooperation Council, and other major markets.

Sachdev argued that domestic economic reforms have also gathered pace, aimed at strengthening growth through domestic demand while liberalising foreign trade. He expects India to stay this course even after the U.S. breakthrough, with its commitment to sovereign autonomy likely on display at the upcoming BRICS summit later this year.

"Observers will be closely watching how India balances engagement with major powers while sustaining its independent foreign policy trajectory," he said.

- ANI