Red lines and retaliation: India-US trade talks hit crossroads

Just a week ago, optimism surrounded the India-US trade talks. US treasury secretary Scott Bessent had suggested a breakthrough was imminent, describing a deal that would lower tariffs and stave off punitive measures from the Trump administration as “nearing” completion.

US President Donald Trump himself confirmed that both nations were “close to a trade deal with reduced tariffs” — a promising sign, especially with the critical 9 July deadline fast approaching. The ambitious goal of expanding bilateral trade to $500 billion by 2030 appeared within reach, reinforcing the narrative of deepening economic cooperation.

But the mood quickly shifted, exposing the intricate and often fraught nature of international trade negotiations. As the deadline drew closer, India’s stance grew more cautious. Finance minister Nirmala Sitharaman, while reiterating hopes for a “big, good, beautiful” deal, was also talking about the government’s commitment to protecting India’s core interests, stressing “definitive red lines” around Indian farmers and livestock producers.

Echoing this position, Union minister Piyush Goyal, once among the most optimistic voices in the talks, now maintains that India will agree only to a “mutually beneficial” agreement. “National interest will be supreme,” he affirmed, underscoring a growing consensus in New Delhi that India will not make concessions on sensitive sectors such as agriculture and dairy simply to meet an external deadline or avoid reciprocal tariffs.

This strategic recalibration comes as the US under Trump continues to push for expanded access to Indian markets — particularly for American agricultural products, automobiles, and industrial goods. Meanwhile, India is pressing for tariff concessions on its own exports and improved entry for sectors such as textiles, gems, and seafood.

India's evolving stance has already begun to manifest in tangible ways. No longer content with simply deflecting “reciprocal tariffs” threatened by the US, India is now exploring the option of imposing “retaliatory tariffs”.

A clear signal of this shift came recently at the World Trade Organization, where India proposed retaliatory duties against the US in response to new American tariffs. Effective 3 May, the US imposed a 25 per cent ad valorem tariff on imports of passenger vehicles, light trucks, and certain auto parts from India — a move that India is now preparing to counter.

Complicating matters further is a change in tone from President Trump himself. Having earlier emphasised a 9 July deadline, he now speaks of a 1 August implementation date for the new tariff regime. This shifting timeline has introduced fresh uncertainty into an already tense negotiation environment.

“My inclination is to send a letter out and say what tariffs countries are going to pay,” Trump was quoted as saying in an agency report. “We have more than 170 countries. And you can make good deals — but they’re much more complicated.”

The result is a trade atmosphere defined by volatility, strategic posturing, and a rising risk of escalation.

So the question now is blunt: is India staring at yet another foreign policy stumble, after what many critics already see as a string of recent setbacks? The specifics may vary, but the India-US trade standoff has become a high-stakes test of New Delhi’s economic diplomacy and political resolve.

The stakes are immense. Failure to clinch a balanced agreement could hit India's $53 billion export sector hard, jeopardising critical industries like pharmaceuticals, textiles, and auto parts. On the other hand, a hasty deal that caves to Washington's demands — particularly on agriculture — risks sparking domestic outrage and political fallout.

What began as a seemingly routine tariff negotiation has now turned into a high-wire balancing act of power politics and economic brinkmanship. The early cheerleading around a “big, good, beautiful” deal has given way to tense recalculations on both sides. With deadlines shifting and positions hardening, the coming weeks will determine whether India can hold its ground and strike a deal that serves its long-term interests — or be cornered into concessions that could haunt its trade future.

This is no longer just about trade — it’s about strategic credibility. And the world is watching.