Shortcomings in India’s U.S. Trade Policy...and the Way Forward

 

By: CA  Anil K. Jain
Chartered Accountant | Economist | Policy Researcher | Author
President – Ahimsa Foundation India
Email: CAINDIA@HOTMAIL.COM

 

While India–United States relations have strengthened considerably in defence, technology, strategic cooperation and people-to-people relations, the economic relationship has not always advanced with the same consistency. India has undoubtedly protected important national interests, but certain weaknesses in its foreign-policy and trade-policy approach deserve objective examination.

The purpose of identifying these shortcomings is not to criticise India's foreign policy establishment. Rather, it is to recognise that in an increasingly transactional global economy, economic diplomacy must become as sophisticated, proactive and continuous as strategic diplomacy.

1. India Has Sometimes Been More Reactive Than Proactive

One weakness has been the tendency to respond to American tariff or regulatory measures after they are announced rather than anticipating them sufficiently early. The recent experience demonstrates the importance of such anticipation. In July 2026, the United States imposed an additional 10 per cent duty on a substantial portion of Indian exports under Section 301 measures, although sustained Indian engagement helped secure a lower tariff tier and important exemptions. Approximately 45 per cent of Indian exports to the United States remained outside the additional duty.

The lesson is clear: India needs a permanent early-warning system for U.S. economic policy.Changes in American tariff policy, Congressional legislation, USTR investigations, customs enforcement, sanctions, technology controls and regulatory standards should be monitored continuously—not merely after they begin affecting Indian exporters.

2. Strategic Diplomacy and Commercial Diplomacy Need Better Integration

India–U.S. relations are frequently discussed through the prism of defence, the Indo-Pacific, terrorism, China and strategic cooperation. These are undoubtedly important.But trade, investment and commercial interests should receive comparable diplomatic attention. A strategic partnership ultimately becomes sustainable when it creates tangible economic benefits for businesses, workers and consumers in both countries.

India should therefore increasingly adopt the principle: “Foreign policy must also serve economic policy.” Every major diplomatic engagement with Washington should contain a clearly defined commercial agenda involving market access, technology, investment, supply chains and employment.

3. India Needs Stronger Economic Lobbying in Washington

The American political system is heavily influenced by structured engagement among government, Congress, industry associations, think tanks, universities, businesses and professional organisations. India possesses enormous goodwill in the United States, including a highly successful Indian diaspora. Yet this intellectual, commercial and political capital can be mobilised more systematically for legitimate economic diplomacy. India should strengthen engagement not only with the White House and USTR but also with:

• Members of the U.S. Congress;
• Congressional committees dealing with trade and technology;
• state governments and governors;
• American chambers of commerce;
• industry associations;
• universities and think tanks;
• major American corporations investing in India; and
• the Indian-American business and professional community.

This should not be viewed merely as lobbying. It is institutional economic diplomacy. India needs a permanent ecosystem in Washington capable of explaining how Indian pharmaceuticals reduce American healthcare costs, how Indian technology companies support American businesses, how bilateral manufacturing creates employment in both countries and why a stronger India contributes to resilient global supply chains.

4. Negotiations Need Greater Speed and Continuity

India has historically been cautious in negotiating comprehensive trade agreements. Caution is understandable because agriculture, small industry and employment must be protected. However, excessive delay also carries an economic cost. Global supply chains do not wait indefinitely for governments. When a competing country obtains preferential access to the American market before India does, international buyers may relocate sourcing contracts. Once factories, logistics arrangements and supplier relationships have moved elsewhere, reversing them can be difficult.

India's own parliamentary panel has consequently called for the proposed U.S. trade agreement to be concluded expeditiously while protecting domestic interests. It has particularly highlighted textiles, gems and jewellery, marine products and leather among labour-intensive sectors affected by U.S. tariff measures. India therefore needs to combine negotiating caution with negotiating speed.

5. India's Tariff Structure Remains a Negotiating Challenge

India must also recognise the criticism frequently made by its trading partners concerning relatively high tariffs and non-tariff barriers. According to USTR's negotiating position, India's average applied tariff was substantially higher than that of the United States, with particularly large differences in agriculture. Washington has also raised concerns regarding technical regulations, import licensing and other market-access restrictions.

Naturally, these figures represent the American negotiating perspective and India's development requirements are different from those of a mature high-income economy. Nevertheless, India should objectively review tariffs that no longer serve a compelling strategic, developmental or employment purpose. Protection should be strategic rather than habitual. Industries requiring temporary support may deserve it. But permanently protecting inefficient production through high tariffs can increase costs for Indian consumers and downstream manufacturers and weaken India's own export competitiveness.

6. Agriculture Requires a More Sophisticated Negotiating Strategy

Agriculture is perhaps India's most politically and socially sensitive trade issue.

India cannot simply replicate the agricultural trade policies of developed economies. Millions of Indian households depend directly or indirectly upon farming. At the same time, treating agriculture as an almost uniformly defensive negotiating area limits India's flexibility. India should classify agricultural products into separate categories. Strategically sensitive products should receive strong protection. Products where controlled imports will not seriously affect farmers can be considered for negotiated concessions. Indian agricultural products with major export potential should become offensive negotiating priorities for gaining access to American markets. Such a calibrated strategy would be considerably stronger than treating agriculture as a single negotiating block.

7. India's Trade Bureaucracy Needs Greater Specialisation

Modern trade negotiations are extraordinarily technical. They involve tariffs, rules of origin, customs valuation, intellectual property, digital commerce, data regulation, pharmaceuticals, sanitary standards, investment screening, environmental provisions, labour standards, subsidies and increasingly national security. India therefore requires a specialised cadre of world-class trade negotiators.

Senior officials should ideally remain associated with important negotiations for sufficiently long periods to develop institutional expertise and personal relationships with their foreign counterparts. Frequent transfers and generalist administrative rotations can weaken continuity in highly specialised negotiations. India should consider establishing a strengthened Indian Trade Negotiation Service or equivalent specialised institutional mechanism, bringing together expertise from government, economics, law, technology, taxation, customs, industry and international commerce.

8. Industry Consultation Must Become Continuous

Government consultation with industry should not occur primarily when a trade crisis emerges. Exporters frequently know about emerging difficulties before government departments do because they receive immediate feedback from customers, customs brokers and international supply chains. India should establish permanent sector-specific advisory councils covering:

Textiles | Pharmaceuticals | Gems & Jewellery | Engineering | Chemicals | Electronics | Automobiles | Agriculture | Digital Services | Defence | Semiconductors

These groups should interact continuously with the Commerce Ministry rather than only during emergencies.

9. MSMEs Need a Trade-Defence Mechanism

Large corporations can hire international lawyers, consultants and customs specialists. Small exporters usually cannot. When an American regulation changes, a small manufacturer in India may not even understand the implications until an order is cancelled. The parliamentary panel's recommendation for a rapid-response unit within the Directorate General of Foreign Trade is therefore particularly important. It has also recommended export credit, insurance, working-capital support and technical assistance for smaller exporters facing tariff disruptions.

India should go further and create an Exporters' Trade Defence and Advisory Cell providing rapid assistance on U.S. customs requirements, tariffs, rules of origin, anti-dumping proceedings and regulatory compliance.

10. India Must Move From Market Access to Supply-Chain Strategy

India should stop viewing the U.S. relationship principally in terms of how many Indian products America will import. The larger opportunity is to make India indispensable to American and global supply chains. The February 2026 bilateral framework already identifies cooperation in supply-chain resilience, technology products, GPUs, data centres, investment and export controls. India should therefore seek American investment and technology in:

Semiconductors • Electronics • Artificial Intelligence • Defence Manufacturing • Pharmaceuticals • Critical Minerals • Clean Energy • Aerospace • Data Centres • Advanced Engineering

The objective should be to move from “Made in India for America” toward “Designed, developed and manufactured jointly by India and America for the world.”

11. What Can Be Done at the Political Level?

Political leadership on both sides is indispensable for building a stable, mutually beneficial and forward-looking India–U.S. economic relationship. At the highest level, the Prime Minister, Commerce Minister, External Affairs Minister and Finance Minister should maintain a coordinated and continuous economic dialogue with their American counterparts, with clearly defined long-term objectives. India should seek a durable and predictable bilateral trade framework rather than depending upon periodic negotiations arising from tariff disputes, while simultaneously securing competitive tariff treatment for employment-intensive Indian exports.

Technology transfer, investment, advanced manufacturing and resilient supply chains should become central pillars of the strategic partnership, supported by institutionalised annual India–U.S. economic summits involving senior political leaders, policymakers and business representatives. India should also deepen its engagement with the U.S. Congress, state governments, industry organisations and other influential economic institutions, rather than concentrating diplomatic engagement primarily on the federal executive.

At the same time, India must preserve its strategic autonomy and independent foreign policy, while avoiding unnecessary economic friction with Washington wherever practical accommodation is possible without compromising fundamental national interests. Political and strategic differences will inevitably arise between two large democracies pursuing their respective national priorities; the essential objective should therefore be to ensure that individual disagreements are managed through sustained dialogue and are not allowed to destabilise the broader economic, technological, investment and strategic partnership between the two countries.

12. What Can Be Done at the Bureaucratic Level?

India’s bureaucratic architecture for managing its economic relationship with the United States requires greater specialisation, coordination, continuity and responsiveness. A permanent India–U.S. Economic Strategy Group should be constituted with representation from the Ministries of Commerce, External Affairs, Finance, Electronics & Information Technology, Heavy Industries, Agriculture and other relevant departments to ensure a unified approach to trade and investment issues.

Alongside this, a specialised U.S. Trade Monitoring Cell should continuously track American legislation, USTR investigations, Congressional initiatives, customs measures, technology controls and regulatory developments so that India can anticipate policy changes rather than merely react to them. The commercial wings of Indian embassies and consulates in the United States should also be strengthened with specialists capable of identifying export, investment and technology opportunities for Indian businesses. Trade negotiators should be provided longer tenures, specialised training and greater institutional continuity, while representatives of industry, exporters and sectoral associations should be systematically consulted before and during major negotiations.

Every significant U.S. tariff or regulatory proposal affecting Indian interests should immediately trigger a comprehensive economic-impact assessment covering exports, employment, industries and affected states. Above all, India needs a whole-of-government approach in which economic diplomacy is jointly pursued across ministries rather than being treated primarily as the responsibility of the Commerce Ministry, thereby enabling faster decisions, stronger negotiating positions and a more coherent defence of India’s long-term economic interests.

13. A National Trade War Room

India should consider establishing a permanent National Trade and Economic Security War Room as a compact, high-level coordination platform bringing together government officials, economists, diplomats, customs and legal experts, technology specialists and representatives of major industries to continuously monitor global trade developments and recommend immediate responses whenever tariffs, sanctions, regulatory changes or supply-chain disruptions threaten Indian economic interests.

In a rapidly changing global economy, where a policy decision taken in Washington or another major capital can quickly affect Indian exports, investment and factory orders, government responses must be equally swift. At the same time, India's commitment to strategic autonomy must be supported by economic strength and diversification, since excessive dependence on individual countries for energy, technology, critical imports or export markets can restrict policy choices.

While the United States should remain a major strategic and economic partner, India must continue expanding its commercial relationships with Europe, the United Kingdom, the Middle East, Africa, ASEAN, Australia, Japan and other important markets. This also requires a broader change in policy mind-set by making economic diplomacy an integral pillar of foreign policy, strengthening Indian embassies as centres for export promotion and investment facilitation, developing trade officials as international economic strategists, involving industry continuously in policymaking, and ultimately evaluating major international relationships not merely through diplomatic achievements but also through their measurable contribution to exports, investment, technology, manufacturing, economic security and employment.

Conclusion: From Reactive Trade Policy to Assertive Economic Statecraft

India must approach the United States neither defensively nor dependently, but with the confidence, clarity and negotiating strength befitting one of the world’s largest and fastest-growing major economies. Access to the enormous American market, advanced technologies, capital and investment presents an exceptional opportunity, but India must pursue it firmly on the principles of equality, reciprocity, predictability and national economic interest. The time has come to move decisively from reacting to tariffs and trade restrictions after they are imposed to anticipating developments, influencing outcomes and actively shaping the economic relationship.

 This demands sustained intervention at the highest political level, a far more specialised and responsive trade bureaucracy, institutional continuity in negotiations, continuous consultation with industry and considerably faster decision-making whenever Indian exports and employment are threatened. In today's intensely competitive world, delay itself carries an economic cost: export orders can move to competing countries, investments can be diverted, supply chains can relocate and employment opportunities once lost may not easily return. India must therefore transform itself from merely being a vast consumer market into an indispensable global centre for manufacturing, technology, innovation and resilient supply chains.

 The administration must recognise that trade policy is no longer a narrow commercial function—it is an instrument of national power, economic security and strategic influence. India possesses the market, talent, entrepreneurial strength and geopolitical importance to negotiate from a position of confidence; what is required now is greater speed, coordination, foresight and execution. If these institutional shortcomings are addressed with urgency, the India–U.S. relationship can move beyond recurring disputes over tariffs and market access and become a powerful long-term economic partnership capable of attracting investment, accelerating technology transfer, expanding exports, strengthening manufacturing and generating millions of employment opportunities.

 The opportunity before India is historic, but it will not remain open indefinitely; the administration must act with urgency and strategic purpose so that India does not merely respond to the changing global economic order, but actively helps shape it in accordance with its national interests.