2025 In Review: Trade: The Uses of Adversity

 INDIA HAS A rare opening to flip the script in its trade deal when the US’ playbook in Asia is predictable. Over the past year, the US has rolled out a surprisingly uniform series of trade arrangements with Malaysia, Cambodia, Thailand, and Vietnam, each built around the same structure, pressure points, and strategic intent. The con­sistency of this model may finally work to India’s benefit.

Across Southeast Asia, the US deals follow a clear for­mula: set a reciprocal tariff ‘baseline’ of about 19-20 per cent on partner exports, carve out narrow zero-duty lanes for items tied to US supply-chain priorities, and press countries to drop non-tariff barriers while adopting US regulatory standards from food safety to autos and digital trade. Added to this are recurring chapters on critical minerals, semiconductors, AI cooperation, export-control alignment, and procurement incentives that naturally steer or­ders towards US aerospace and energy firms.

The sequence is now familiar. Finalise goods and compliance first, fold in services and digital provisions later. For smaller econo­mies looking for stability, this model offers predictability. But India’s size, reform momentum, and expanding value chains place it in a very different category. It has both the weight and the confidence to shape, not follow, the script.

Since 2019, New Delhi has rebuilt its trade strategy around develop­ment rather than diplomacy, and the timing couldn’t be better. The Indian economy just expanded by a striking 8.2 per cent in the second quarter of this financial year, outperforming major forecasts, including the Reserve Bank of India’s (RBI) own 7 per cent estimate. Combined with PLI schemes, the semiconductor mission, GST rationalisation, labour reforms, and logistics upgrades, India’s negotiating power has become structural rather than cyclical.

Together, they place India in a fundamentally different category from ASEAN economies, where the US template has played out with limited improvisation. India is not a “larger partic­ipant in the same model” but a system shaper with agenda-setting power. FTAs with the UAE and European Free Trade Association (EFTA), and ongoing talks with the EU and the UK already reflect this shift from optics to outcomes. The focus has moved towards manufacturing depth, tech acquisition, services expansion, and supply-chain resilience.

Tranche I of the India-US BTA is now in its final stretch. This phase tackles the steep reciprocal tariffs of 50 per cent that weigh on Indian exports, while opening space for select US farm and energy products, such as apples, almonds, ethanol, and certain genetically modified crops. Set for completion in 2025, it will of­fer quick relief to Indian exporters and give Washington a clearer agricultural foothold.

Tranche II, scheduled for 2026, is where the deal becomes strategic: services, digital rules, mobility, investment norms, and regulatory cooperation. This is the realm that will shape India’s economic future.

Washington’s template is predict­able, and that predictability is now a strategic asset for India. Rather than broad tariff reductions, New Delhi should channel negotiations towards targeted zero-duty corridors for in­termediate goods that feed India’s manufacturing ambitions. Inputs for electronics, medical devices, renewable energy systems, and telecom equip­ment can be prioritised, ensuring that tariff concessions build domestic value rather than import dependence.

Where standards matter in sectors such as auto, environment, pharma, and agriculture, India must avoid unilateral adoption of US norms. Instead, establishing a joint equivalence mechanism can preserve regulatory autonomy while smoothing export pathways, shielding sensitive sectors such as pharma, dairy, and agriculture from sudden certification dependencies, a risk many Southeast Asian partners had limited capacity to negotiate.

As Washington increasingly ties market access to cooperation in semiconductors, critical minerals, AI, clean energy, and high-tech procurement, India can leverage its strong IT base and expanding electronics ecosystem to secure co-investment, technology transfer, and deeper supply-chain integration from chip assembly and EV components to renewables and quantum-ready data centres.

Parallel negotiations on LNG, ethanol, and renewable energy imports can serve as macro stabilisers, balancing politically sensi­tive tariff changes by easing currency pressures and moderating trade surpluses.

Tranche II allows India to move beyond tariff fixes and shape the strategic core of the agreement. A simple three-pillar approach can guide this phase. The first is mobility, where India can lever­age US talent shortages in chips, AI, biotech, and clean energy to secure faster, sector-based movement for skilled professionals. The second is digital trade, supporting smoother cross-border flows while protecting India’s data frameworks through sover­eign control over sensitive datasets and jointly developed norms on privacy, cybersecurity, and AI. The third is technology and co-development, using US interest in semiconductors, critical minerals, and clean tech to negotiate co-investment, access to advanced tools, and participation in resilient supply chains across chip packaging, EV components, aerospace, and renewables. To­gether, these pillars help India shape Tranche II on its own terms rather than negotiate only at the tariff margin.

India is one of the few economies combining open trade cor­ridors with a strong industrial policy, an apparent duality that actually strengthens its negotiating position. As the US looks for partners capable of anchoring resilient and politically viable sup­ply chains, India can argue that access to advanced inputs fuels domestic capability-building without displacing local firms, un­like in smaller ASEAN markets, a narrative that justifies deeper concessions. India is no longer negotiating for access but for ar­chitecture. The US template is not a threat but a map, and India now has the economic confidence to redraw it, positioning Delhi not as a rule-taker but as a co-author shaping the next generation of trade norms.