U.S. Push to ‘Fix’ Trade Ties Raises Concerns for India and Emerging Economies

Context:

• The Howard Lutnick, U.S. Commerce Secretary, stated that the United States wants to “fix” trade relationships with countries such as India, Brazil, and Switzerland.

• The remarks come amid rising trade protectionism, tariff escalations, and disputes over market access and reciprocity under the Trump administration.

• The issue has direct implications for India–U.S. economic relations, global trade norms, and emerging market economies.

Key Highlights:

U.S. Position on Trade Relations

• The U.S. argues that certain countries:

  • Do not follow reciprocal trade practices

  • Maintain restrictive market access regimes

  • Undertake actions allegedly harmful to U.S. economic interests

• Lutnick warned that continued access to the U.S. market depends on these countries opening their markets further.

Tariff Measures and India

• The U.S. imposed a 50% tariff on Indian goods, including:

  • A 25% penalty linked to India’s oil trade with Russia

• These measures reflect Washington’s attempt to use trade tools for strategic and geopolitical signalling.

India’s Response and Strategic Autonomy

• India defended its energy trade with Russia, noting that:

  • The U.S. and EU also import Russian energy and goods

• India has consistently emphasized:

  • Strategic autonomy

  • Energy security

  • Right to pursue independent economic decisions

Other Countries Under Scrutiny

• Switzerland was cited for running a $40 billion trade surplus with the U.S.

• The U.S. claims such imbalances indicate unfair benefits accruing to partner countries.

• Brazil, like India, is viewed as a major emerging economy with protective trade policies.

Search for New Trade Frameworks

• The U.S. is seeking bilateral trade agreements on the lines of the U.K.–U.S. trade understanding, focusing on:

  • Market access

  • Reduced trade deficits

  • Stronger enforcement mechanisms

• This signals a move away from multilateral trade frameworks toward transactional bilateralism.

Diplomatic Engagement and De-escalation

• A telephonic conversation between Prime Minister Narendra Modi and President Donald Trump on September 16 indicates:

  • Efforts to ease trade tensions

  • Willingness to prevent economic disputes from derailing broader strategic ties

• Highlights the balancing act between economic friction and strategic partnership.

Broader Implications

• Reflects growing trade nationalism and protectionism in global trade.

• Raises concerns for developing economies dependent on access to advanced markets.

• Undermines predictability of the rules-based international trading system.

• Pressures countries like India to diversify export markets and deepen FTAs.

UPSC Relevance (GS-wise):

• GS Paper 2 – International Relations

  • Prelims:

    • India–U.S. relations, bilateral trade diplomacy.

  • Mains:

    • Impact of protectionism on India’s foreign policy choices.

    • Managing trade disputes within strategic partnerships.

• GS Paper 3 – Indian Economy

  • Prelims:

    • Tariff, trade deficit, trade relations.

  • Mains:

    • Effects of unilateral tariffs on exports and economic growth.

    • Need for trade diversification and resilient supply chains.