Trump won't let other countries score big ‘wins' in trade talks. Both sides could lose.

Politico

10 hours ago

A trade agreement with India was supposed to be one of President Donald Trump's first victories from the 'reciprocal' tariff salvo he fired against dozens of trading partners in early April. But while the administration has been promising for more than two months that a deal is imminent, they're still struggling to get it over the finish line.
Two people close to the negotiations, granted anonymity because of the sensitivity of the discussions, say Washington and New Delhi continue to make progress toward the first phase of a trade deal, with the expectation that a more comprehensive agreement could come later in the fall. But the White House's demands to 'open up India' as it seeks a major trade victory ahead of President Donald Trump's self-imposed July 8 deadline — as well as his attempt to link the talks to thorny geopolitics in the region — have made it that much harder for Prime Minister Narendra Modi's government to sell the deal to a domestic audience.
And it underscores how Trump's all-sticks-and-no-carrot approach to trade talks is making it difficult for even friendly foreign governments to reach an agreement they fear could be political suicide back home — no matter how much the White House threatens their economies.
'Nothing riles Indians more than the idea that their government was bullied by a foreign leader,' said Syed Akbaruddin, India's former ambassador to the United Nations. 'A trade bargain that could have been a win-win deal now risks being portrayed by those who oppose it as a tribute, not a partnership.'
India was one of the first countries to begin trade negotiations with the U.S., launching talks in February as Trump began to unveil his ambitious agenda to upend global trade. Negotiators have reached agreement on some agricultural issues, energy purchases and non-tariff barriers, prompting rosy White House projections that a deal is in the offing.
While visiting India in late April, Vice President JD Vance announced the two sides had 'officially finalized the Terms of Reference' for the negotiations. Commerce Secretary Howard Lutnick said June 3 that, 'You should expect a deal between the United States and India (in the) not-too-distant future because I think we have found a place that really works for both countries.'
And at an event at the White House on Friday, Trump, himself, teased that, 'I think we're going to reach a deal where we have the right to go in and trade' in India. He added, 'We're looking to get a full trade barrier dropping, which is unthinkable, and I'm not sure that that's going to happen, but as of this moment, we've agreed to that.'
But it has proven difficult to officially ink a deal, people close to the negotiations say, because of all the things the Trump administration is asking India to do to lower its trade barriers, while only offering to give up some of its newly-imposed tariffs, in return.
For the White House, which is rapidly approaching its deadline, India would be just the second country that has agreed to a deal, not counting a tariff ceasefire with China. Any agreement would have to help justify the administration's claim that Trump's high tariff rates are truly helping to open up new markets for American products, while protecting the U.S. market.
'Productive discussions with India continue, and we look forward to announcing an historic U.S.-India trade agreement in short order,' said a White House official, granted anonymity to discuss the negotiation.
The president has complicated matters by repeatedly taking credit for brokering peace between India and Pakistan this spring — even though India has long insisted it won't accept any mediation when it comes to Pakistan. Modi underscored that point in a recent call with Trump, saying that there is 'complete political consensus in India on this matter,' according to a readout of the call from India's foreign minister.
The diplomatic fumble, which the president repeated multiple times this week, including at the NATO summit in the Netherlands, coupled with Trump's recent decision to host Pakistan's army chief at the White House, could make it harder for the Indian government to sell a trade deal to its people.
'Trump's comments have injected mistrust and public skepticism of U.S. support to India,' said Akbaruddin, India's former U.N. ambassador. 'The more he repeats his claim, the more a prospective U.S.-India trade agreement smells like coercion, not cooperation.'
'Whatever the current government [in India] does, it will be seen as they basically capitulated to President Trump's demand,' said Mukesh Aghi, the President and CEO of the U.S.-India Strategic Partnership Forum. 'So they are in a no-win situation.'
The White House views tariffs as a cudgel to extract concessions from foreign countries — both on trade matters and a wide array of other foreign policy priorities. But it has failed to grasp, or simply doesn't care, how much trading partners' domestic politics factor into the discussions, and ultimately may trump even the existential economic threat the U.S. can wield.
Talks with South Korea stalled while the country, under a caretaker government, moved to elect a new leader. Negotiations with Japan have been snagged by the Trump administration's demand that Tokyo increase defense spending and insistence on maintaining its 25 percent tariff on auto and auto parts imports, a massive blow to one of Japan's culturally defining industries. EU leaders have balked at U.S. efforts to undermine their VAT, a domestic consumption tax.
India has some of the highest tariffs of any major economy in the world, with an average rate of around 17 percent. Its government, in particular, has long sought to protect the country's millions of subsistence farmers, who have outsized political clout.
In 2020, after the Parliament of India passed farm legislation, farmers held a sustained protest for more than a year and eventually succeeded in getting the laws repealed. They protested again in 2024, criticizing the government for not doing more to help farmers.
'India is protective of its farmers, which is why they have relatively high tariffs compared to anywhere in the world,' said Sharon Bomer Lauritsen, a former agriculture negotiator at USTR who currently works with AgriTrade. 'They're going to protect their farmers.'
The Trump administration has been here before. During his first term, negotiators worked with India in an attempt to secure a bilateral trade deal — similar to agreements the administration was able to negotiate with Japan and South Korea.
The deal would have centered around three areas — increased access to India's agricultural, information technology and medical devices markets. But as talks dragged on and the scope of the deal shrank, Trump scrapped the plan.
'They got very close, really, really close to concluding a first-ever bilateral trade deal,' said Mark Linscott, a former negotiator for USTR who was involved in negotiations with India. 'This time around it's clearly a priority for both sides …. It's the agreement that got away.'
Much of the challenge has been opening India's agricultural market, particularly when it comes to the genetically modified crops grown in the U.S. and dairy products. India, as a majority Hindu country, has significant religious concerns about the import of byproducts from cows.
While the Biden administration was able to secure increased access for specialty agriculture products like nuts and cranberries, India is reluctant to make deals that undercut its own farmers.
Any early deal with India would likely focus on products that are not readily accessible in the country, like fruits and vegetables, nuts, alfalfa and potentially ethanol.
But, despite the political tension in India, the U.S. agriculture industry has continued its long-standing push to open the country's fast-growing market to U.S. products, particularly dairy.
A deal on dairy is still proving elusive, even as the U.S. has shifted its strategy to lower tariffs and simplify the certificates necessary to allow more dairy products into the country.
'They've been pretty clear all along that dairy was going to be a heavy lift,' said a person close to the negotiations.
Any deal announced by July 9 is likely to just be the first phase of an ongoing effort to secure a substantial bilateral trade agreement with India — a process that could stretch on for at least another year, those close to the discussions say.
Linscott, who negotiated with India for USTR in the first Trump administration, said the administration knows the U.S. will likely have to make some concessions in order to secure a larger deal, putting the talks in a different bucket than other deals the U.S. is seeking to negotiate.
'India is the fourth largest economy in the world now, will soon be the third largest economy in the world, and is a critical strategic partner in the Indo-Pacific,' Linscott said. 'I think all those factor in a bit in the overall negotiating dynamics.'
Phelim Kine contributed to this article.