India’s optimal approach to securing a beneficial trade deal with the US involves persistent, low-key negotiations rather than aggressive posturing, according to a State Bank of India (SBI) research report. It recommends that India avoid public confrontations, make cautious and reversible offers, and keep dialogue channels active to gradually wear down the US’s initial demands.
The report highlights that India should hold off on major concessions until Washington’s true threshold becomes clearer, emphasizing India’s strategic advantages as a large market, technology partner, defense buyer, and key player in the Indo-Pacific region. Testing the US administration’s resolve while signalling a readiness for short-term costs could enable India to secure greater long-term benefits.
The US under President Donald Trump is described as employing uncertainty as leverage in multiple areas, including NATO relations, tariffs, and negotiations with Iran and China. India’s position between NATO allies and China grants it unique bargaining power, stemming from its market size, skilled workforce, pharmaceutical capabilities, defense procurement potential, energy options, diaspora networks, and regional influence.
Applying game theory, the SBI report suggests Washington maintains incomplete information about its negotiation stance, forcing India to decide whether to concede, delay, test resolve, or escalate. While this uncertainty can erode trust and impose future costs, it also signals to all parties that US positions may shift when domestic or geopolitical costs rise, potentially diminishing the effectiveness of initial demands.
In parallel, despite a memorandum of understanding signed between the US and Iran aiming to end hostilities, shipping data from the Strait of Hormuz indicates only incremental recovery of trade flows. Limited crude oil shipments have resumed, while agricultural imports are recovering unevenly and LNG and fertiliser trade remains mostly stalled.
This context underscores the complex international environment influencing US trade and foreign policy decisions, factors India must consider carefully as it negotiates to maximize its strategic and economic interests.