Trade Deal
US-Vietnam trade deal casts doubt on India's strategy to manage Trump tariff
This story was originally published at 14:06 IST on 4 July 2025
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By Krity Ambey
NEW DELHI – Ever since US President Donald Trump announced his plans to raise customs duties and impose country-wise reciprocal tariffs, New Delhi has clung to the hope of a trade deal with Washington to safeguard Indian exports from the forthcoming additional tariffs. However, the latest trade deal between the US and Vietnam raises questions on whether India's strategy can effectively insulate its outbound shipments from Trump's tariff tantrums.
The US and Vietnam signed a trade deal on Wednesday, under which American traders can export their goods to Vietnam at zero duty, whereas Vietnamese goods will attract a duty of 20% in the US. Of course, a 20% duty is lower than the 46% reciprocal tariff that the US had earlier envisaged for goods imported from Vietnam. At the same time, this new trade deal also undermines the previous pact between the US and Vietnam signed in 2000, which allowed Vietnamese goods access to the American markets at 2-10% tariff.
"Indian negotiators must closely study the Vietnam deal's shortcomings—especially the reversal of earlier concessions, the imposition of blanket tariffs, and the vague treatment of Rules of Origin," Ajay Srivastava, former commerce ministry official and founder of think-tank Global Trade Research Initiative, said. "These features reveal a clear US tilt toward securing unilateral gains."
Right after Washington released its list of country-wise reciprocal tariffs on Apr. 2--which showed 26% duty to be levied on Indian goods--the commerce ministry assured they would expeditiously conclude the proposed Bilateral Trade Agreement with Washington. When Trump announced a 90-day pause on reciprocal tariffs, the Indian government was absolutely confident of sealing the trade pact before Jul. 9, the deadline for the tariff pause.
With less than a week left for the expiration of the pause on reciprocal tariffs, mixed sentiments of optimism and apprehension surround the India-US trade deal. Additional Secretary at the commerce ministry and India's chief negotiator, Rajesh Agrawal, and his team have just returned from Washington after week-long negotiations, and the announcement of the deal, once concluded, is likely any time. However, what are the chances New Delhi, like Hanoi, would not have to pick between a rock and a hard place?
Vietnam can manage to maintain a trade surplus with the US even with a 20% duty due to the cost advantage that it has over the US, trade expert and director at the Centre for Development Studies C. Veeramani said. "But going all in, like Vietnam, could have grave repercussions for India."
From what is known so far, India draws a line in trade agreements when it comes to opening the farm sector. Trump, on the other hand, in multiple occasions, expressed interest in gaining access to India's agri market. This is a major point of discrepancy between New Delhi and Washington.
"A selective approach is the best bet for New Delhi in terms of a trade deal with the US," Veeramani said. "This trade deal can be a partial one--covering top export goods to the US, and India can also choose to open market access for some less vulnerable products in the farm sector." India's top exported products to the US include electronic goods, gems and jewellery, pharmaceuticals, and petroleum products.
Washington's reciprocal tariffs, if they take effect on Wednesday, may significantly hurt India's exports growth, as the US is India's top export destination with a 19.8% share in India's total outbound shipments. India exported goods worth $86.51 billion to the US in 2024-25 (Apr-Mar) and had a trade surplus of $40.82 billion during the period, according to commerce ministry data. End
US$1 = INR 85.45
Reported by Krity Ambey
Edited by Tanima Banerjee
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