Deal or No Deal: Will India's Economy Stand to Prosper From Trump's Visit?

US President Donald Trump's two-day visit to India has been widely anticipated as a great chance for the two countries to restore their trade relations after years of deepening tensions, especially after the promise made by Trump to seal "a great deal" with the second largest country and fifth biggest economy in the world.

Despite the close personal relationship between Donald Trump and India's Prime Minister Narendra Modi, India and the United States were recently involved in several disputes in terms of trade relations.

It started with the Trump administration's decision to impose a 25% tariff on $761 million of steel and 10% on $382 million of aluminum imported from India in March 2018, followed by Indian import taxes on 28 different US products three months later, which included products like almonds, apples, and walnuts. 

In June 2019, the US withdrew key trade privileges that were granted earlier to India under the Generalised System of Preference (GSP), which allowed duty-free Indian exports of up to $5.6 billion, turning the US into the biggest market for Indian exports for years. According to the US Trade Representative's office, American goods and services trade with India totaled an estimated $142.6 billion in 2018.

India's Hopes

Ever since exchanging import restrictions, US and Indian officials have often highlighted on-going negotiations that aim to align the economies of the two countries again, on the basis of a new "fairer" trade deal, similar to the one signed between the US and China earlier this year.

Trump's first state visit to India as president of the United States on the February 24th inspired great hopes that the visit will witness a wide-ranging trade agreement between the two countries.

Over the past few weeks, Indian analysts have been bracing for a comprehensive deal between India and the United States, one that entails India's hopes for increased market access, especially in the agriculture and automobile sectors.

Additionally, India hopes that the US will restore some parts of the GSP benefits, so India can resume exporting about 3000 product items to the United States.

Deal or No Deal?

On the US' part, the Trump administration would want to generate more revenue by pressuring India to lower import duties on dairy products and Harley Davidson motorbikes, as well as review the prices of several medical devices made in the US.

Prior to Trump's arrival, the Indian government initiated a few offers to encourage the US president to sign a trade deal during his visit, such as their decision to allow poultry imports from the US and to slash tariffs imposed on chicken legs from 100% to 25%.

While India is the world's largest producer of milk and has always tried to protect the industry that allows more than 80 million local households to earn their living, the Indian government made an unprecedented announcement allowing 5% access to US producers to its markets.

Post-Elections Mega-Deal

Even though many Indian experts hoped that the US and India were adding final touches to a bilateral trade deal during Trump's visit, US officials pulled out of signing a mini-deal citing the need for a bigger more thorough mega-deal.

Shortly before leaving the White House for his visit to India, Trump anticipated that "a great deal" will be signed after the 2020 US presidential elections next November.

This move has been perceived by many as an attempt by Trump to ensure receiving campaign financial support from Indian-American voters, who have been increasingly influential in terms of their great fundraising capacities, being that they are among the most well-off groups in the United States.

Unlike the slow trade deal, a $3 billion defense deal was announced during the first day of Trump's visit, through which Trump promised some of "the absolute finest state of the art military helicopters and other equipment to the Indian armed forces."