The US decision to impose reciprocal tariffs on Mexico and Canada has sent shock waves across India, where many analysts have expressed apprehensions over the US intentions and possible commitments that may be made in the Bilateral Trade Agreement.
US President Donald Trump (Image credit: Reuters)
Should India sign the Bilateral Trade Agreement (BTA) with the US?
Will Washington adhere to all the commitments made under the proposed BTA or breach the protocol for its benefit and profit?
US President Donald Trump’s announcement to impose a 10% tariff on energy and a 25% tariffs on other products from Mexico and Canada has raised many questions.
US Replaces NAFTA With USMCA
North America Free Trade Agreement (NAFTA) between the US, Mexico and Canada existed since 1994 till 2018, when Trump rejected it in his first term of presidency, arguing that the treaty was tilted in favour of the other two countries, which exported goods to the US.
He argued that Mexico and Canada exploited the US benevolence, imposed too much tariffs on its products and enjoyed the trade surplus.
Trump forced the two neighbours to sign the United States-Mexico-Canada Agreement (USMCA), which came into force in 2018-19.
US Upset Over Trade Deficit With Mexico, Canada
However, both Mexico and Canada continued to have a trade surplus with their rich neighbour.
US-Mexico bilateral trade stood at an estimated value of $839.9 billion in 2024. While Washington exported goods worth $334.0 billion to Mexico, it imported products worth $505.9 billion from that country. Eventually, the US suffered a trade deficit of $171.9 billion.
The situation is not different with another US neighbour, Canada. The US-Canada bilateral trade stood at $762.1 billion to Canada in 2024. While it exported goods worth $349.4 billion to Canada, it imported goods worth 412.7 billion USD. It registered a trade deficit of $63.30 billion.
Donald Trump Throws Trade Deals Out
Denouncing the two neighbours along with Brazil, China, India and the EU, Donald Trump declared the imposition of reciprocal tariffs on these countries, beginning April 2, 2025.
These tariffs will be imposed notwithstanding the provisions made in the United States-Mexico-Canada Agreement (USMCA).
The trade deal mentioned all kinds of arrangements, concessions and restrictions between the three North American countries.
Now, the US President wants to reject those provisions, which he made a few years back.
Will US Respect Trade Deal With India?
It has sent shock waves across India, where many analysts have expressed apprehensions over the US intentions and possible commitments that may be made in the Bilateral Trade Agreement.
Donald Trump offered the BTA to India during Prime Minister Narendra Modi’s US visit last month. Though he announced reciprocal tariffs in the presence of PM Modi and said in the most unequivocal terms that “the US would impose equal tariffs on all items, no less, no more”, he also asked India to sign the BTA.
It is believed that the two countries will agree on certain concessions for mutual benefits and sign the Bilateral Trade Agreement.
However, analysts are skeptical on the issue and some of them have expressed apprehension that Washington may go back from the commitment made in the BTA, as it is now doing with Mexico and Canada.
What is the way forward for India?
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