Following several days of questions and uncertainty, the US and India have released a joint statement announcing they have reached ‘an interim trade deal framework.’ This announcement comes after US President Donald Trump and Indian Prime Minister Narendra Modi revealed a trade deal between the two countries on February 2. This de-escalates the months-long dispute that has strained the countries’ bilateral relationship and signals a significant shift in their relations.
Core Claims of the Trade Deal
The central element of the deal is the reduction of US tariffs from 50 per cent to 18 per cent. This is a huge relief to Indian exporters in sectors such as textiles and apparel. In return, India intends to purchase goods worth $500 billion, including energy products, aircraft and aircraft parts, precious metals, technology products, and coking coal, over the next five years. At the same time, India will eliminate or reduce tariffs on all US industrial goods, as well as a wide range of US food and agricultural products. This includes dried distillers’ grains (DDGs), red sorghum for animal feed, tree nuts, fresh and processed fruit, soybean oil, wine and spirits, and additional products.
Economic Impact and Strategic Risks
The recent tariff reduction offers relief to industries previously impacted by Trump-era duties. At 18 per cent, India is now at a more favourable rate than regional competitors like Vietnam (20%) and Bangladesh (20%). While this move opens up India to a larger market, it brings new challenges. The impact is especially visible in the agriculture sector. India has historically protected the agriculture and dairy sectors. Given that almost half of the population depends on agriculture, the government has consistently protected farmers from foreign products. The reduced tariffs for U.S. food and agricultural products could have significant implications. While sensitive sectors continue to be protected, fresh fruit farmers, soybean oil producers, and the poultry sector will see considerable changes.
Another concern involves the purchase of Russian oil. Donald Trump had said that Modi agreed to stop buying Russian oil, further claiming that India would switch to US and Venezuelan oil. In an executive order, he stated that India ‘has committed’ to halt Russian oil imports and directed a committee, led by Commerce Secretary Howard Lutnick, to monitor whether India ‘directly or indirectly’ imports Russian oil. Based on the panel’s recommendations, the US could reimpose the 25 per cent punitive duty. Such monitoring of trade raises serious questions about India’s strategic autonomy. This can also damage India’s long-standing relationship with Russia. There is no mention of Russian oil in the joint statement, and Indian ministers have refused to provide a direct answer regarding what has been agreed upon. Foreign Secretary Vikram Misri reiterated that ‘national interest’ will be the guiding factor in India’s energy sources.
The lack of details is a major challenge in understanding what this deal entails. Last month, Trump raised tariffs on South Korean imports back to 25 percent from 15 percent, citing delays in the South Korean legislature’s approval of the deal and stating that ‘they are not living up to the agreement.’ This shows that even a concluded agreement cannot be considered final. Therefore, it remains to be seen what this agreement actually includes and how it will affect the country. With two back to back agreements with the EU and the US, India is now positioning itself as a more open and trade‑friendly economy.
