President Trump restructures US-India trade negotiations in anticipation of other deals being signed

Analysts say a new push toward a U.S.-India trade deal could be in full swing as the White House sees other countries and powers working harder than ever to remove trade and tariff barriers.

The EU and India signed a long-awaited trade deal on Tuesday, potentially increasing the urgency and momentum for negotiations across the line after the two countries signed an agreement to phase out tariffs on most of each other’s imports.

“The EU-India agreement…could ignite efforts to reach a trade deal between the United States and India and help advance negotiations on a comprehensive bilateral trade agreement,” Mark Linscott, non-resident senior fellow on India at the Atlantic Council, commented on Tuesday.

President Trump has yet to react to the EU-India deal, which has been two decades in the making, but the US is concerned about bilateral trade deals between other powers and could view them as a potential threat.

The US already has a trade deal with the EU (maintaining a 15% tariff on exports from the EU to the US), but negotiations are certainly in more uncertain territory when it comes to the US’ own stalled trade negotiations with India, which has imposed a 50% tariff.

But Linscott, an expert at the Atlantic Council, says there is no need for the U.S.-India deal to derail. “While this agreement may be interpreted as a response to the Trump administration’s tariffs and tariff threats, there is no reason to undermine the U.S.’s trade relationship with the EU or India,” he said.

India’s oil and gas minister told CNBC on Tuesday that a U.S.-India trade deal is at a “very advanced stage” but acknowledged that he does not have a timetable for a deal.

“I’m going to try to look on the positive side. I’m not a fortune teller, so I don’t know when a trade deal will happen or how long it will take. But I think (everyone) needs to be a little calm,” he told CNBC’s Amitij Singh as India and the EU announced a landmark trade deal.

“I’ve heard from the people involved[in the negotiations]that it’s at a very advanced stage, and I’m hopeful that it will see the light of day sooner rather than later,” he added of the U.S. deal.

The EU and India have described their agreement as the “mother of all agreements”, and while the deal means the two countries will join together at a time when global trade is under strain due to tariffs, sanctions and geopolitical rivalry, it does not weaken India’s desire to seek a deal with the US, analysts at global risk consultancy Teneo said.

Analysts Arpit Chaturvedi and Karsten Nickel said in emailed comments on Tuesday that the deal “reduces (though does not eliminate) pressure on India to strike a deal with the United States, India’s largest trading partner (both in goods and services) and defense partner.”

Analysts at Citi said on Wednesday that the market is “closely watching the immediate impact” of the EU-India agreement on tariff negotiations between India and the US.

“It remains to be seen whether Indian authorities will be in a better position to withstand US tariff hikes given easier access to the EU’s large market, but there is hope that these negotiations can proceed quickly.”

Sushmita Debeshwar, chief India economist at TS Lombard, said there are a number of issues that prevent an immediate deal.

“After almost 20 years of negotiations, the free trade agreement with the EU could not have come at a better time for India, which is struggling to reach a deal with the US,” he said in an email analysis on Wednesday.

“Trade negotiations with the US have stalled due to US insistence on expanding India’s access to agricultural markets and for India to stop buying cheap Russian oil.…Low levels of agricultural mechanization and large numbers of subsistence farmers “Agriculture is a very politically sensitive sector in India. However, India appears to be reducing its purchases of Russian crude oil,” he said, noting that in December, purchases of Russian crude oil fell to the lowest level in two years.