By Annunthra Rangan
India’s decision to first resist steep American tariffs and then return to the negotiating table has produced what may prove to be one of the most consequential recalibrations in its recent economic diplomacy. The newly announced interim trade framework between India and the United States is being hailed in both capitals as a breakthrough after months of tariff escalation. It lowers duties, expands market access, and signals deeper cooperation in strategic sectors.
Yet, beneath the optimism lies a more intricate reality: this is not a finalized trade treaty, but a provisional framework shaped by trade-offs, geopolitical leverage, domestic political sensitivities, and the conditional character of US trade policy under President Donald Trump.
RESETTING THE TARIFF EQUATION
At its core, the agreement resets a tariff relationship that had become punitive. US reciprocal tariffs on Indian exports—reportedly touching levels as high as 50 percent during the escalation phase—have been reduced to approximately 18 percent across most goods. For Indian exporters in sectors, such as textiles, engineering goods, pharmaceuticals, gems and diamonds, and leather, this rollback materially alters cost competitiveness in the American market.
In return, India has agreed to reduce or eliminate tariffs on selected US industrial and agricultural products. These include certain animal feed inputs, nuts, fruits, soybean oil, wine, and spirits. The framework also sketches a pathway towards zero tariffs on key Indian export categories once the interim arrangement matures into a fuller agreement.
The immediate market reaction was emphatic. The Nifty 50 rose roughly 2.5 percent in the wake of the announcement, the rupee strengthened, and bond yields softened. Investors interpreted the tariff rollback as a reduction in external vulnerability and a positive signal for export-led growth. But markets price relief quickly; policy durability unfolds more slowly.
AGRICULTURE: SHIELDED, BUT UNEASY
From New Delhi’s perspective, agriculture remains the most politically sensitive domain. Officials have emphasized that 90 to 95 percent of Indian farm staples—including rice, wheat, dairy, sugar, and pulses—are excluded from tariff concessions. Given the economic and electoral centrality of farming, this carve-out is essential.
Still, farm unions and Opposition parties remain sceptical. Even limited reductions on specific US agricultural inputs could, they argue, distort domestic price signals and gradually expose vulnerable producers. Trade analysts also note that the framework leaves room for future product expansions, creating uncertainty about the trajectory of liberalization. In a country where agricultural reforms have historically triggered mass mobilization, reassurance on paper does not automatically translate into political comfort.
STRATEGIC GAINS—AND COSTS
Economically, the logic of the deal is straightforward. India gains improved access to the world’s largest consumer market and strengthens cooperation with Washington on supply chains, technology standards, and regulatory alignment. These are not marginal benefits. As global manufacturing reorganizes away from excessive concentration in China-centric networks, India seeks to position itself as a credible alternative production hub. Closer economic integration with the United States enhances that narrative.
But access comes at a price. Opening segments of the Indian market to American goods incrementally narrows policy space. While concessions appear calibrated rather than sweeping, the structural asymmetry between the two economies remains. The US market is significantly more critical to Indian exporters than India’s market is to most American industries. That imbalance confers enduring bargaining leverage to Washington, even within a reciprocal framework.
The frequently cited figure of India’s intention to purchase up to $500 billion worth of US goods across energy, technology, and aerospace sectors has been framed as an aspirational target rather than a binding obligation. This preserves flexibility for New Delhi but simultaneously limits the certainty Washington might seek.
THE RUSSIA VARIABLE
Perhaps the most delicate dimension of the framework is its implicit linkage to India’s purchases of Russian crude oil. While punitive tariff pressures associated with those purchases have reportedly been lifted, the relief appears conditional. The message is clear: tariff tools remain available should expectations not be met. This introduces geopolitical compliance into trade architecture.
India’s long-standing doctrine of strategic autonomy rests on diversified partnerships. Russia remains a significant energy and defence supplier. Although India has broadened sourcing and engagement with Western partners, it is unlikely to subordinate its core security calculus entirely to trade incentives. The framework therefore embeds a tension. It draws India deeper into
US-aligned economic structures while energy and defense realities require continued diversification.
FRAMEWORK VS TREATY
It is important to distinguish between symbolism and structure. This agreement is a framework—an institutional pathway and tariff roadmap—not a fully ratified trade treaty. Many provisions are directional rather than legally binding. Several exclusions are defined as current positions, not permanent guarantees. The difference is not semantic; it is enforceable.
Durability will depend on whether the interim understanding evolves into codified commitments covering digital trade, intellectual property rights, customs procedures, labour and environmental standards, and dispute settlement mechanisms. Without such legal scaffolding, executive discretion remains central—and discretion introduces uncertainty.
Under President Donald Trump, US trade policy has demonstrated both assertiveness and volatility. Tariffs have been deployed as instruments of leverage and revisited when political priorities shift. That pattern does not preclude stable cooperation, but it underscores the need for structured safeguards.
DOMESTIC CONSENSUS AND POLITICAL RISK
Trade diplomacy cannot be sustained without domestic legitimacy. Opposition parties in India have demanded fuller transparency about product lists, safeguard triggers, and future liberalization commitments. Farmer groups question whether incremental exposure could accumulate over time. Trade scholars highlight opacity around enforcement and review mechanisms.
A trade arrangement that is geopolitically advantageous but domestically contested can become politically fragile. Managing internal consensus will be as critical as managing the external partnership.
A CALCULATED COMPROMISE
Taken together, the interim trade framework appears less like a sweeping strategic realignment and more like a pragmatic recalibration. It reduces immediate export stress, strengthens investor sentiment, and deepens economic cooperation with the United States at a moment of global supply chain realignment. It also introduces asymmetry, conditionality, and geopolitical crosscurrents that will require steady navigation.
The agreement can be described as mutually beneficial, but not symmetrical. The gains are tangible. The leverage is uneven. The future remains contingent.
For India, the prudent path forward lies in calibrated engagement: consolidate export advantages, lock in legal protections, preserve strategic autonomy, and maintain diversified global partnerships. In an era where trade and geopolitics are inseparable, economic diplomacy must be both ambitious and cautious.
This framework opens a door. Whether it becomes a durable corridor will depend on what both sides build next.
—The writer is a Senior Research Officer at Chennai Centre for China Studies. Her research interests constitute China-WANA (West Asia and North Africa) relations and human rights
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