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As India and the United States approach a critical juncture in bilateral trade negotiations, the stakes have never been higher. A failure to secure a mutually favorable trade treaty could have profound implications for India’s export-driven economy, especially given the rapidly evolving global trade landscape marked by protectionism, supply chain realignments, and geopolitical recalibrations. At the center of this concern is the escalating tariff threat from the US and the rising competition from agile export economies like Vietnam.

The most immediate and quantifiable impact of a failed trade agreement would be on India’s direct exports to the US, which currently constitute a substantial share of its outbound trade. With the US being India’s largest export destination, any disruption could mean a loss of up to one-third of these exports. This would not only dent export earnings but also trigger ripple effects across production, employment, and investment in export-dependent sectors.

According to recent estimates, India’s GDP could decline by 0.7% in the absence of a deal. This loss is not merely a result of lower trade volumes but also stems from reduced competitiveness in the US market, where tariff barriers would place Indian goods at a clear disadvantage. If the current average tariff of 10% on Indian products rises to the proposed 26% or higher, Indian exporters will face a significant cost handicap compared to those from countries like Vietnam and China, which already enjoy preferential access or are in the process of negotiating more favorable terms.

Sectorally, the impact would be uneven but deeply felt. Textiles, apparel, footwear, gems and jewelry, electronics, and especially seafood exports are among the most exposed. For instance, in just the shrimp export segment, India could lose up to $1.6 billion annually if the US shifts its sourcing to Vietnam, which enjoys better tariff treatment. The loss is not just theoretical—it is backed by patterns of sourcing shifts that have occurred in other commodities and regions in the past decade.

In aggregate, the cumulative loss to Vietnam in overlapping export categories could be as high as $5 billion, as US buyers recalibrate their supply chains to avoid higher costs and tap into alternate Asian markets. The strategic disadvantage here is stark: while India negotiates, competitors like Vietnam are capturing market share.

This is not just a story of tariffs and numbers; it’s a deeper concern about India’s global trade posture. A delay or failure in securing a deal sends a signal of unpredictability and inefficiency, which could discourage long-term investment and technology transfers from the US and allied economies. Moreover, sectors hoping to benefit from the China+1 strategy might see their prospects dim if India is viewed as a high-tariff, high-friction trade partner.

The implications also reach into India’s Make in India and PLI (Production Linked Incentive) schemes. These initiatives are designed to boost domestic manufacturing and exports, but their success depends heavily on stable and favorable access to large markets like the US. A steep tariff regime would neutralize many of the cost advantages created through these policies.

The economic rationale is clear: securing a favorable trade treaty with the US is not just about market access; it is about retaining and growing India’s global competitiveness. Without it, India could lose billions in export revenue, suffer measurable GDP contraction, and witness the erosion of strategic goodwill in one of its most important bilateral relationships.

In an interconnected world where trade alliances shape economic trajectories, India must act decisively to avoid strategic marginalization. The cost of inaction—or inadequate negotiation—is not abstract. It is measured in lost jobs, shrinking export orders, disrupted supply chains, and economic underperformance. At this moment, the choice is between becoming a preferred global partner—or falling behind in the race for relevance in the new world economy.

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