In response to rising protectionism and evolving geopolitical shifts—particularly under the Trump administration’s trade policies—India is recalibrating its global trade strategy. The landscape of Free Trade Agreements (FTAs) and international trade is undergoing a noticeable transformation, as developed countries show increased flexibility on non-trade issues to accelerate deals with India. The shift places India at a critical juncture, with multiple FTA negotiations underway and strategic adjustments in the pipeline.

A Changing Global Trade Environment

U.S. President Donald Trump’s decision to impose additional tariffs, including a recent 26% reciprocal tariff on Indian imports, has caused ripple effects across global supply chains. With the U.S. representing around 18% of India’s goods exports, this policy threatens to constrict one of India’s key trade corridors. The Indian government, in turn, is pursuing diversification through robust FTAs and advocating for more lenient trade frameworks.

Additionally, developed countries—particularly the EU and UK—are softening their stance on non-trade issues such as sustainability, labor rights, and carbon taxation, offering India a window to expedite long-pending FTAs.

Strategic Responses by India

India is leveraging this evolving trade climate by:

• Allowing the rupee to depreciate moderately to increase global competitiveness.
• Fast-tracking FTA negotiations with a diversified group of economies.
• Engaging in global supply chain realignments to offset potential U.S.-imposed losses.

Key Trade Dynamics Overview

Key Factor	Details
U.S. Share in Indian Exports	~18%
Recent Tariffs	10% duty (April 5) + 26% reciprocal tariff (effective April 9)
Government Strategy	Push for FTAs, rupee depreciation, diversification
Non-Trade Issues (NTIs)	Sustainability, labor laws, carbon adjustment
Shift by Developed Nations	Relaxing NTI requirements to speed up FTA deals
Rupee Depreciation Impact	Boosts export competitiveness
Global Trend	Focus shifting to core trade elements amid geopolitical tensions

India’s Ongoing and Upcoming FTA Engagements

India is actively pursuing or revisiting FTAs with the following regions and countries:

FTA Partner	Type	Current Status	Key Focus Areas
European Union (EU)	Comprehensive FTA	Deadline within the year	Goods, services, sustainability, investment
United Kingdom (UK)	Bilateral FTA	In final stages	Services, healthcare, technology
Australia (CECA)	Comprehensive Economic Cooperation Agreement	Ongoing negotiations	Trade, investment, tech
United States	Bilateral Trade Agreement	Under assessment	Tariff reduction, market access
Gulf Cooperation Council (GCC)	FTA	Talks to resume	Goods, services, energy
India-Mercosur	Expanded FTA	Negotiations ongoing	Goods, agriculture, technology
India-Canada	Comprehensive FTA	Resumed talks	Services, investment, technology
RCEP	Multilateral	Potential future entry	ASEAN integration

Carbon Border Adjustment and Trade Compliance

As sustainability standards like the EU’s Carbon Border Adjustment Mechanism (CBAM) evolve, Indian SMEs face challenges in compliance. However, proposed EU modifications may offer relief and smoother export pathways for steel, aluminum, and cement products.

Conclusion: Navigating a Realigned Global Order

India’s proactive trade strategy reflects a timely response to global tariff uncertainties, especially with the U.S. revising its trade posture. The ongoing trade negotiations and the softened stance on non-trade issues by developed nations provide India with a strategic edge to deepen its trade relationships, mitigate export risks, and strengthen its global economic standing.