India's Existential Trade Dilemma in Trump’s 'Closed Door' Orbit

All eyes are on where and when Prime Minister Narendra Modi’s much-publicised trade mission will land in President Donald Trump’s “closed door” reciprocal tariff orbit. With speculation mounting, and considering the seemingly humiliating trade deals recently struck by Vietnam, Indonesia, the Philippines, and even Japan, India may not expect kid-glove treatment from Washington.

As the fifth round of high-stakes bilateral negotiations between India and the United States wraps up this week, anxiety is rising. Many are asking: what can India do differently from Indonesia, especially when both nations share several multilateral trade priorities?

There’s growing concern that India may be pressured into a one-sided trade deal with the US – one that might involve placing its "family silver" on the table. This could include partial liberalisation of agriculture and a surrender on the termination of e-commerce moratorium, all while receiving few reciprocal concessions.

The US has made no secret of its objectives. Washington has openly stated that the benefits of its "closed door" trade demands will accrue primarily to itself – often at the expense of the most vulnerable, including poorer developing and even some developed nations. The nature of these concessions – and the pressure to accept them – feels eerily similar to the mythological Minotaur: a creature that devours all in its path, symbolising Washington’s appetite for trade dominance.

Worse still, the sweeping demands for regulatory and policy changes echo the heavy-handed tactics of America’s historic "open door" policy of 1899 – enforced through military interventions in countries like Cuba, the Philippines, and China. As history has shown time and again: the more things change, the more they stay the same.

Historian Howard Zinn, in A People’s History of the United States, argued that the “open door” policy was less about free trade and more about securing economic and political influence in China, a critique that feels eerily relevant today.

Nearly 130 years later, countries are again facing a rebranded but no less forceful “closed trade” regime under Trump, this time without boots on the ground, but through aggressive tariff reductions and regulatory demands. Deals already signed with Vietnam, Indonesia, and the Philippines set troubling precedents, and India may be next.

Of particular concern are the dramatic concessions made by countries like Indonesia, despite their persistent underdevelopment and poverty.

India and Indonesia: Once aligned, now diverging?

India and Indonesia, with populations of 1.4 billion and 280 million respectively, have historically aligned their agricultural trade positions at the WTO. Since the fifth ministerial conference in Cancun in 2003, both countries have led the G33 coalition of developing nations, pushing for:

• A permanent solution on public stockholding for food security;
• A special safeguard mechanism to counter import surges; and
• Broader agricultural livelihood protections.

Despite their efforts, progress has been repeatedly stalled – often by the United States. At the 2015 WTO ministerial in Nairobi, the US blocked key proposals even after developing countries watered down their demands. In 2017, Indian negotiator, ambassador J. S. Deepak, pushed for an outcome on public stockholding at the Buenos Aires ministerial, only for US Trade Representative Robert Lighthizer to torpedo the talks by sending a low-level delegate to block the draft. The talks collapsed instantly.

Now, in stark contrast to its earlier positions, Jakarta has agreed to eliminate 99% of tariff barriers for US industrial and agricultural products. According to the White House’s Joint Statement released on July 22, Indonesia will:

• Exempt US food and agricultural products from all import licensing, including commodity balance rules;
• Recognise US regulatory oversight – including automatic listings of US meat, poultry, and dairy facilities;
• Accept certificates issued solely by US authorities.

This dramatic shift sets a worrying precedent for India, unless the Modi government decisively draws a line – something it has so far been reluctant to do.

E-commerce moratorium: A test of resolve

Another domain where India and Indonesia had aligned was the WTO’s moratorium on customs duties for electronic transmissions. The moratorium, initiated in 1998 under pressure from President Clinton and others, has cost developing countries billions in lost revenue. India, Indonesia, and South Africa had fought to end the moratorium, and finally succeeded at the 13th WTO Ministerial in Abu Dhabi in March 2024. The moratorium is scheduled to expire by end-March 2026.

Yet, in a stunning reversal, Indonesia has now agreed to permanently support the moratorium “immediately and without conditions” as part of its US trade deal. This raises a pointed question: Will the Modi government now abandon a cause it had championed for years?

The US-Indonesia deal also includes several multilateral commitments that Jakarta had previously resisted due to domestic constraints – yet they now appear embedded in a bilateral deal, crossing red lines once thought untouchable.

In addition, Indonesia has agreed to:

• Supply the US with critical minerals, and
• Sign massive Boeing aircraft deals worth tens of billions of dollars.

This, while the Trump administration continues to unilaterally violate WTO norms with tariffs, and yet demands that others strictly adhere to multilateral rules.

Some argue that the deal might not have materialised under a different government in Jakarta. President Prabowo Subianto, a former four-star general and associate of the infamous Suharto regime, may have taken a different approach — one more aligned with the US’s strategic vision.

India’s crossroads

As India stares down the barrel of a potential deal with the US, it faces a moment of reckoning. Already penalised with a 50% tariff on steel and aluminium exports, a 25% tariff on auto parts; and looming duties on pharmaceuticals, even a modest reduction of the “reciprocal” tariff from 26% to 17-18% may not be enough. If India accepts a similar agreement without significant reciprocal gains, it may find itself in an economic and strategic abyss.

Unless the Modi government asserts itself and walks away with dignity, India risks losing far more than a trade deal. It risks trading away its sovereignty, bargaining power, and long-term strategic autonomy at a time when the world can least afford another tale of capitulation.

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