New Delhi: Recent tensions between the U.S. and India, especially regarding trade, have prompted India to rethink its international partnerships. As Prime Minister Narendra Modi plans visits to Japan and China, India’s potential re-entry into the Regional Comprehensive Economic Partnership (RCEP) signals a strategic pivot towards Eastern nations. This shift could be motivated by new U.S. tariffs on Indian imports, challenging India’s trade dynamics.
Shifting Trade Dynamics: The U.S. and India
Amid increasing friction between the U.S. and India, particularly surrounding trade relations, India appears to be pivoting more towards Eastern economies. Prime Minister Narendra Modi’s upcoming visits to Japan and China represent a significant diplomatic move as these countries have been crucial players in the Asian economic landscape. This strategic shift comes on the heels of punitive new tariffs imposed by the U.S. on Indian goods, specifically targeting the country’s oil purchases from Russia.
With a 25% tariff set to take effect, India is evaluating its trade strategy. For instance, recent reports indicate that India is contemplating rejoining the Regional Comprehensive Economic Partnership (RCEP), a significant trading bloc that includes 10 ASEAN nations and other major economies like China, Japan, Australia, and South Korea. This reconsideration follows India’s exit from the RCEP negotiations nearly six years ago, primarily due to concerns over trade deficits with China and potential threats to domestic sectors such as agriculture and manufacturing.
Export Trends: U.S. vs. RCEP
An analysis from *Mint* shows that India’s export landscape has increasingly favored the U.S. over recent years. In fact, the share of India’s exports directed to the United States has risen dramatically, from 13.5% in 2014-15 to nearly 20% today. Conversely, trade with countries in the RCEP has fluctuated, peaking at 21% before the pandemic and dropping to approximately 17% in the post-COVID era.
This evolving trade landscape suggests that while the U.S. emerges as a dominant force in India’s export strategy, there are sectors where India could still benefit from the RCEP. For instance, products like electronic goods, pharmaceuticals, and gems and jewelry have seen substantial demand, and tapping into the RCEP could enhance India’s position in these markets.
However, India’s historical hesitation regarding the RCEP—primarily due to fears about its agriculture and dairy sectors—could complicate efforts to re-engage with the bloc. Past concerns were reiterated by Commerce Minister Piyush Goyal in December 2024, emphasizing that the RCEP discussions failed to adequately address India’s protectiveness over these sectors.
A Changing Perception in Southeast Asia
Despite its challenges, India is recognized as the world’s fastest-growing major economy, balancing China’s influence in the region while seeking new partnerships. Recent surveys conducted by the ISEAS-Yusof Ishak Institute reveal a gradual improvement in India’s image among Southeast Asian countries. In 2025, a modest 2.9% of respondents recognized India as having the most economic power, a notable increase from just 0.6% the previous year.
Moreover, 13.5% of those surveyed viewed India as a viable third-party option to mitigate the ongoing U.S.-China trade rivalry. This perception shift presents immense opportunities for India to explore fresh trade agreements within the ASEAN framework and beyond, creating a more diversified economic landscape to counterbalance U.S. tariffs.
The Path Forward: RCEP Reconsideration
Given the changing global economic environment, India’s reconsideration of the RCEP may offer a way forward amidst strained U.S. relations. Engaging with this 15-country trading bloc could help India mitigate potential losses from U.S. tariffs while unlocking new markets for its exports.
In sectors where India has historically excelled—like manufacturing and technology—the possibilities could be expansive with renewed trade agreements. For instance, consider the electronics industry, where partnerships with countries like Japan and South Korea could foster innovation and increase competitiveness.
But as India navigates this complex landscape, balancing the protection of domestic industries with the need for broader trade agreements will remain crucial. Policymakers will need to engage with various stakeholders, from farmers to industrialists, to forge agreements that are economically beneficial while addressing local concerns.
In summary, as global trade dynamics shift with increasing U.S.-India tensions, India’s strategic pivot towards RCEP and eastern economies may play a crucial role in redefining its economic landscape.
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📚 Research References
- www.livemint.com
- RBI
- SEBI
- Ministry of Finance
- NABARD
- Department of Financial Services (DFS)
- LiveMint
Original source: www.livemint.com
