In trade deal with US, India needs to secure terms harder to reverse
Source Entity
Soumya Bhowmick
The US-India trade relationship faces significant uncertainty due to volatile tariff policies and legal challenges. Experts argue that long-term stability requires transparent guidance and structured frameworks to replace reactive, emergency-based measures.
Navigating the Volatility of India-US Trade Relations
Recent developments in the trade relationship between New Delhi and Washington highlight a growing concern among policy experts regarding the structural integrity of bilateral agreements. Following the unveiling of an interim trade deal framework in February, testimony provided to the US-China Economic and Security Review Commission underscored a critical reality: the most detrimental barrier to economic cooperation is not the specific tariff rate, but the pervasive atmosphere of uncertainty. This confusion forces businesses and national stakeholders into a cycle of hedging, which prevents the realization of a truly integrated economic partnership.
The Impact of Legal and Political Volatility
The fragility of current trade arrangements was further exposed when the US Supreme Court struck down reciprocal tariffs that had been in place since April 2025. These duties, enacted under emergency powers, served as the primary justification for India’s corresponding tariff rates. The court's decision effectively creates a legal vacuum, demonstrating that agreements tethered to temporary or emergency executive actions are fundamentally precarious and prone to abrupt reversal, leaving both nations scrambling to realign their trade strategies.
Beyond Paper Rates: The Need for Predictability
To move beyond the current state of flux, the dialogue between India and the US must shift toward creating institutionalized mechanisms that ensure consistency. The expert testimony suggests that enforcement must be paired with transparent guidance and structured, ongoing consultations. By replacing ad-hoc, emergency-based policy shifts with a more predictable regulatory framework, Washington and New Delhi can reduce the risk premium that currently discourages long-term investment and strategic planning by firms operating across these markets.
Historical Context of Emergency Tariffs
The reliance on emergency laws for trade enforcement represents a departure from traditional, treaty-based trade diplomacy. Historically, the use of emergency powers has been intended for short-term geopolitical leverage, but their application to broad trade frameworks has introduced a level of volatility that complicates the India-US relationship. This shift toward unilateral, duty-based negotiations has created a ripple effect, where domestic legal challenges in the United States directly dictate the economic landscape for Indian exporters.
Future Trends and Strategic Implications
Looking forward, the trend suggests that unless India and the US codify their trade agreements through more durable, legislative-backed channels, the relationship will remain susceptible to domestic political cycles. Future trade negotiations should prioritize 'hard-to-reverse' terms that provide a stable foundation for industrial growth. If both nations can successfully transition from reactive tariff adjustments to a collaborative, transparent consultative process, they stand to mitigate the economic friction that has historically hindered their full potential as strategic partners.
Summary
The ongoing challenge for India and the US lies in decoupling essential trade cooperation from the volatility of emergency executive orders. By emphasizing structural predictability and transparency, the two nations can move toward a more robust, stable economic framework that benefits both domestic industries and global trade stability.