Trump’s tariff blitz sparks hope for Indian textile exporters, but deal with US may still be a tough bargain

On July 8, the share prices of several Indian textile manufacturing companies rose sharply after US President Donald Trump announced that a reciprocal tariff of 35% would kick in on exports from Bangladesh to the US on August 1. Indian stock markets were reacting to the ‘positive sentiment’ the news brought in for Indian exporters, as they have been struggling to compete with textile products from Bangladesh in the US market for a long time.

In addition to Bangladesh, additional tariffs were announced on products from 13 other countries as well. India was not on the list. It was expected that India and the US would announce an interim free trade agreement (FTA) deal that would take care of tariff threats through mutually agreed tariff cuts on both sides soon.

The wait for the initial phase of the India-US trade deal continues, but the FTAs the US has signed with other countries in recent weeks, and the tariff-hike letters all 14 countries received in the last few days, suggest that the chances of a fair and mutually beneficial agreement with the US are thin—be it India or any other country. Delhi-based trade policy expert Ajay Srivastava says Trump’s model isn’t an FTA, but YATRA—or Yielding to American Tariff Retaliation Agreement.

Srivastava, the founder of trade think tank Global Trade Research Initiative (GTRI), says agreements with the Trump Administration have been MASALA deals—or Mutually Agreed Settlements Achieved through Leveraged Arm-twisting—for the countries that managed to announce such agreements.

Are the recent tariff measures by the US so one-sided?

On July 7, Trump signed formal letters to 14 countries, outlining the tariffs they will face from August 1 if they fail to conclude a deal. While Japan, South Korea, Kazakhstan, Malaysia, and Tunisia were threatened with a 25% tariff hike, it was 30% for South Africa and Bosnia and Herzegovina, 32% for Indonesia, 35% for Bangladesh and Serbia, 36% for Cambodia and Thailand, and 40% for Laos and Myanmar. These warnings, described by the White House as “final notices,” left countries with two choices: either sign a deal on US terms or face punitive duties.

Trump has also issued a warning against retaliation—any country that raises its tariffs in response will see US duties increase even further. The US administration believes the strategy will force hesitant partners like Japan, South Korea, and the EU back to the table. Early signs of nervous reactions in some capitals suggest the pressure may be working.Srivastava says that despite being presented as trade “agreements,” Trump’s deals do not meet WTO standards for FTAs, as under WTO rules, FTAs require mutual tariff reductions on a substantial share of trade.

That is because under the Trump model, only the partner country lowers its MFN tariffs, while the US makes no reciprocal cuts.In April, Trump had announced a 26% surcharge on top of normal US tariffs on goods coming from India. However, it is yet to be operationalised, and that is where an early India-US deal is expected to help. If India has to make concessions to avoid the 26% tariff threat, it will still be a pressured compromise, not a true partnership.

Trump’s unpredictability on such matters also raises concerns, as a trade deal doesn’t mean there will be no surprise tariff announcements. Just last week, he threatened an additional 10% tariff on BRICS countries—including Brazil, Russia, India, and China—if they pursue what he calls “anti-American” policies.

“Trump’s warning makes it clear: any country seen as aligning with BRICS positions may face new tariffs, regardless of previous deals. The message—loyalty trumps legality,” says Srivastava.

As Trump himself has said before, a ‘trade’ deal with India can get announced any day. It is known that India’s proposal is already with the US. To what extent will that proposal be diluted? Will it be enough for Trump to backtrack from his 26% tariff threat against India? Even if the additional tariffs against India are comparatively less than what the US has announced against other trading partners, India may benefit, as the textile stocks indicated. That’s the hope.