Trade Talks vs. Trade Barriers: The Real Test for Modi’s India

India and the US have reopened trade talks after Washington’s sudden shift from harsh rhetoric to a conciliatory tone. While the dialogue appears “positive,” India’s exporters—especially Morbi’s ceramic tile cluster—remain under strain as tariffs mount not just in America but across Oman, the EU, and Latin America. With exports falling and domestic real estate demand sluggish, the Rs60,000-crore industry faces financial stress and fears of defaults.

Experts argue that survival depends on innovation, design-led R&D, and new free trade agreements. Yet, instead of addressing these challenges, opposition politics remains consumed by petty attacks. Unless government and industry act swiftly, India risks losing ground to competitors like China, Spain, and Italy in a sector where it is the world’s second largest producer

Trade discussions between Indian and U.S. officials have resumed after Washington made yet another U-turn. Just last week, White House adviser Peter Navarro accused New Delhi of acting as a “laundromat for the Kremlin” and claimed India’s elite were profiteering at the expense of ordinary citizens.

Now, in a striking shift, the U.S. delegation led by Brendan Lynch, Assistant Trade Representative for South and Central Asia, has held “positive” and “forward-looking” talks with Indian officials.

The reset followed a more conciliatory note from President Donald Trump, who had earlier imposed punitive tariffs on India over its Russian oil imports.

In a phone call with Prime Minister Narendra Modi on the latter’s 75th birthday, Trump even thanked him for “help in ending the war between Russia and Ukraine”—though he offered no details.

India’s Commerce Ministry later said the two sides had decided to “intensify efforts to achieve early conclusion of a mutually beneficial trade agreement.” The agenda covered bilateral trade ties, including a possible deal.

So far so good. But Washington’s duties are hardly the only challenge for Indian exporters. Other countries are tightening the tariff net too.

Oman recently slapped steep duties on ceramic and porcelain tiles from India and China—ranging from 17.6% to a punishing 70%. The European Union, with its 27 members, along with the Gulf Cooperation Council, has imposed tariffs between 6% and 106%. Mexico, Peru, Brazil, and possibly Vietnam is also contemplating anti-dumping measures.

The impact has been especially severe on the Morbi tile cluster in Gujarat, which exports to over 150 countries. Although exports to the U.S. make up only a fraction—barely six days of Morbi’s annual output—the wider wave of duties has battered the sector.

Morbi has around 900 ceramic units, of which nearly 600 are export-oriented. The industry’s annual turnover is estimated at Rs60,000 crore, with exports accounting for about Rs18,000 crore. Yet, tariffs have created stagnation in what was once a high-growth sector.

The pain is evident. Many units face cash-flow shortages and fear defaults on bank loans. While lenders note the industry has not yet slipped into the non-performing asset (NPA) category, the strain is visible. Demand within India is insufficient to offset export losses, raising concerns about financial discipline and repayment schedules.

Tile makers are urging the government to recalibrate strategy. Morbi vitrified tiles are renowned for their quality and beautify millions of Indian homes. But unless policies shift, the industry risks long-term decline.

India is the world’s second-largest ceramic tile producer, competing directly with China. Industry watchers argue that Beijing, wary of India’s rising market share, quietly influences other nations to impose tariffs on Indian products. This external pressure compounds the internal challenges of pricing practices and lack of innovation.

If India’s ceramic industry is to survive, structural reforms are essential. First, manufacturers must invest in R&D. Many Indian industries continue to neglect design innovation, relying instead on volume and price competition. Developing unique, high-quality designs could make Indian tiles irresistible—even after duties.

Second, exporters need to scout for new buyers and markets while pushing the government to negotiate free trade agreements (FTAs). Spain and Italy, both major tile producers, operate under far lower tariff regimes. India cannot afford to lag.

Third, the industry must abandon its habit of undercutting. Export prices should not fall below domestic rates, yet Indian exporters often slash prices in the face of competition. This practice itself invites anti-dumping action.

If current trade talks fail, tile exports to the U.S. could grind to a halt. Without decisive moves, India’s ceramic sector risks losing ground permanently.

The external tariff problem is compounded by weak domestic demand. The real estate sector, the primary consumer of ceramic tiles, has slowed. Builders are delaying projects, pushing back orders for interiors, which include tiles. Demand only arises when buildings near completion.

Adding to this, interior designers are turning to alternative materials, cutting into tile demand. As a result, many ceramic units are scaling back production. The slowdown threatens jobs, ancillary industries, and the broader economy.

Government intervention could help. Boosting real estate growth, encouraging affordable housing projects, and incentivising tile usage in public works could offset export losses. A coordinated push from both state and central governments is crucial.

Amid these pressing challenges, India’s opposition appears distracted. Rather than tackling trade and industry issues, parties remain fixated on petty politics.

The recent misuse of social media to circulate an AI-generated video of Prime Minister Narendra Modi’s mother who was never in politics and is not alive now is a case in point. Abusing political opponents’ families is neither constructive nor democratic.

Opposition leaders would do better to focus on substantive issues such as tariffs, exports, and job creation. Voters respond to solutions, not slander.

The example of Andhra Pradesh’s TDP is instructive: by highlighting the YSRCP government’s failures while simultaneously offering policy alternatives, the party along with its allies, Jana Sena and BJP won credibility and eventually electoral victory.

If India’s opposition adopted a similar approach nationally—challenging the government on trade policies while proposing their own roadmap—the ruling NDA would face serious heat. Instead, misplaced negativity dilutes their relevance.

As Gandhi Jayanti approaches on October 2, one hopes the opposition will gain “sanmati”—wisdom—and reorient toward constructive politics. With upcoming polls in Tamil Nadu and Assam, opportunities remain to shift gears.

For the government, meanwhile, the immediate task is to protect strategic industries like ceramics. Negotiating FTAs, reducing tariffs, and reviving domestic real estate must be top priorities. Left unaddressed, the situation risks eroding not only one industry but also India’s credibility as a reliable global supplier.

The trade talks with the U.S. is a welcome restart. But without a broader strategy—spanning diplomacy, industry reform, and political focus—India’s exporters will remain vulnerable to the next tariff shock.

(The author is a former Chief Editor at The Hans India)