After Sergio Gor’s meeting, Indian negotiators headed back to US for trade talks

Officials from both the US and India have indicated that resolution of the Russian oil issue is a precursor to the negotiations for a Bilateral Trade Agreement (BTA).

Tensions between India and the US began to ease after a phone call between US President Donald Trump and Modi last Thursday in which the PM congratulated Trump on the “success of the historic Gaza peace plan.” Modi added that he had also reviewed the “good progress achieved in trade negotiations.”

That was their second conversation since September 16, when the Prime Minister received a call from the US President on the eve of his 75th birthday. The Indian Express had reported that the two sides have been exploring the possibility of a meeting between the two leaders on the sidelines of the ASEAN and East Asia Leaders’ Summit in Kuala Lumpur, Malaysia, from October 26-28. Both sides have yet to announce their travel plans.

The likely thaw between the two countries comes when US-China talks appear to be faltering. Reacting to fresh curbs announced by China on critical minerals, Trump threatened 100 per cent tariffs. However, Trump seemed to dial down Sunday, “Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment. He doesn’t want depression for his country, and neither do I. The US wants to help China, not hurt it.”

The Chinese embassy in the US said: “China’s position on the trade war is consistent: we do not want it, but we are not afraid of it.” In one of its most direct responses yet to American tariffs, China said: “If the US insists on going the wrong way, China will surely take resolute measures to protect its legitimate rights and interests.”

Tariffs have begun to bite

The talks with the US assume significance as the Trump administration’s 50% tariffs on Indian products have begun to hurt small businesses. A survey report released by the Confederation of Indian Textile Industry (CITI) on Monday said about a third of the respondents reported that their turnover had been adversely reduced by more than 50 per cent, as majority of American buyers are seeking discounts or have resorted to cancelling orders.

“About 85 per cent of the respondents have reported an inventory build-up due to the reduction in orders, and about two-thirds of the respondents have had to offer discounts to their buyers, the majority of which are to the tune of 25 per cent to remain competitive,” the survey report said.

Manufacturers have also flagged an extended credit cycle across the supply chain as a result of the recent tariffs, stating that the credit period has increased by three to six months, reflecting a substantial strain on liquidity.

The US is the top export destination for India’s textile and apparel (T&A) products, accounting for about 28 per cent of India’s global T&A exports.

Uncertainty over relief package

The Centre had asked exporters to hold on to their market share in the US as key ministries were working on a relief package, but discomfort has been growing among exporters as the package remains stuck. Exporters’ concerns assume significance as front-loading until now had masked the original impact of the tariffs, and mitigation, officials said, is needed immediately.

Gem & Jewellery Export Promotion Council (GJEPC) chairman Kirit Bhansali met Finance Minister Nirmala Sitharaman on September 24 to seek urgent relief measures for the sector, which has been severely impacted by the US tariffs.

GJEPC said it has requested further interventions from the government to help the sector survive and sustain employment until the ongoing India–US trade negotiations are concluded. “These include measures such as allowing reverse job work and DTA sales by SEZ units, extending export obligation periods for US shipments, providing an interest moratorium on packing credit and working capital loans, and offering liquidity support to exporters,” it said in a statement.