The US-India interim trade deal has become a proper political football. A deal which protects India’s vulnerable sectors and allows opportunities for its economy, especially its labour-intensive sectors to grow is a fair deal. The fact that it was thrashed out amid a torrent of abuse and relentless arm-twisting from the Trump White House, the fact that a degree of reciprocity permeates the ongoing deal despite American treaty allies and partners settling for more exploitative terms, suggest that India absorbed the pressure and managed to hold its ground despite the huge power differential.
The Indian leadership has displayed patience, resilience and pragmatism in not rushing into an agreement on unequal terms. But a state’s actions are also a function of its power and leverage. We are not China. India cannot take countermeasures against the Trump administration’s obvious high-handedness and force it to call truce, as Xi Jinping compelled Donald Trump to do. We lack the leverage that China holds in rare earths and critical minerals.
When India’s biggest export destination, which is also the world’s largest and richest consumer market, abruptly restricts access and slaps highest tariffs on Indian exports to crack open India’s vulnerable domestic sectors, then New Delhi’s subsequent sovereign decisions cannot be just an academic exercise. Those decisions must be evaluated in context of the potentially massive economic damage and employment loss staring at us, particularly in labour-intensive, export-reliant sectors.
India needs to grow at 8% or 9% for the next two decades to achieve its developmental objectives. It needs access to critical and emerging technology. It needs foreign investment. To pretend that these could be achieved in a hyper-transactional world without any meaningful trade-offs is not a serious argument. The era of America’s strategic altruism is long past us. This US administration believes NATO is a burden, throws transatlantic allies under the bus and seeks to grab sovereign land belonging to a NATO partner.
In such a situation, what is the point of performative defiance? What are India’s realistic options? To not strike the trade deal and suffer perennially the consequences in a blaze of anti-imperialist glory? How long could New Delhi have sustained that strategy, and what would have been the short-term or long-term impact of such martyrdom?
Economists estimate India’s real GDP could have declined by 0.2% to 0.4% in the short term, force growth to
slip below the 6% mark and trigger a 0.97% rise in domestic prices due to supply-chain disruptions and retaliatory measures.
Since the US is India’s top market that absorbs 18% of exports and contributes to 2.2% of India’s GDP growth, a sustained 50% tariff would have eroded export competitiveness, caused factory shutdowns, mass layoffs, and intensify unemployment in labour-intensive manufacturing belts.
In a note published last November, GTRI, a think tank, observed that “between May and September 2025, India saw its exports to the US plunge from $8.8 billion to $5.5 billion, which indicates a 37.5% decline.” Surprisingly, smartphones and pharmaceuticals, sectors that enjoyed a carve out from the tariffs, experienced the steepest fall. It goes to show that tariff-related damage is felt in myriad, twisted ways.
The GTRI note adds that “labour-intensive sectors such as textiles, gems and jewellery, chemicals, agri-foods, and machinery” that account for nearly 60% of India’s exports to the US, “suffered a 33% decline, from $4.8 billion in May to $3.2 billion in September,” according to the report published in Livemint.
“Gems and jewellery exports collapsed 59.5%, from $500.2 million to $202.8 million, sending units in Surat and Mumbai down the drain as Thailand and Vietnam captured lost US orders.”
These are not theoretical losses. These are tangible cuts that were bleeding the Indian economy and sending several sectors into deep distress. The point to note is, did Trump succeed in arm-twisting the Indian leadership to sign a deal at the cost of its red lines? Did New Delhi act in haste?
The answer is firmly in the negative. Faced with a set of onerous options, the Narendra Modi government initiated domestic reforms to shape internal structural resilience. The GST was simplified to spur domestic demand.
India tapped newer markets, diversified export destinations and signed a string of bilateral trade deals, most importantly a long-pending one with the 27-bloc European Union to soften the blow dealt by an abusive Trump administration.
New Delhi kept calm. Unlike Trump, Prime Minister Modi did not lower the dignity of his office. This was no mean feat. India held out for more than nine months and refused to compromise on red lines. It ring-fenced the politically and economically vulnerable agricultural and dairy sectors, maintained seed autonomy, kept in mind farmer livelihood, resisted US pressure on genetically modified crops, and kept pushing for preferential US market access.
The agreement that has resulted from the ordeal does involve trade-offs, but it is also a notable diplomatic and economic success. It calls for recognition. At the very least, the agreement merits a well-rounded discussion instead of the knee-jerk scepticism that marks any transactions with the United States.
The deal has been made into a litmus test for India’s strategic autonomy. Sweeping generalisations abound on social media on how India has submitted its sovereignty by agreeing to an interim framework. It says more about the sceptics with zero-sum mindset who seek one-sided trade deals where India would maintain high walls around its economy while getting preferential access to rival markets.
If you want 99.99% purity, seek it in bullion, not strategic autonomy. Any deal involves give-and-take. To focus only what India has been forced to “give” without evaluating what it is getting in return is not a measure of India’s lack of sovereignty but a reflection of postcolonial insecurity.
The biggest problem for the Modi government is that with his antics and insults, Trump has poisoned bilateral relationship to such an extent that India was always going to have a hard time tackling criticism despite negotiating a fair deal.
The merits or demerits have been clouded by the toxic ambience around it. I blame the US President for this – his lies, obfuscations, bullying tactics and a neurotic obsession with power and control. Trump is an egotist, and a deal isn’t good enough for him unless he appears to be on top of his counterpart, or makes it appear as if he is doing the other side a favour.
As Evan A Feigenbaum of Carnegie Endowment writes, “Remarkably, and for the first time in two decades, Trump’s actions, statements, and coercive tone have made relations with the United States a combustible domestic political issue in India. The opposition, the media, and the Indian public have put the government on notice to avoid showing weakness in the face of Trump’s threats.”
Though both sides had thrashed out a fairly equivalent agreement in the end, Trump sat on it for months hoping to bulldoze Indian government into opening up its core agricultural and dairy sectors. The eventual announcement of the interim framework – and it isn’t a coincidence that it came close on the heels of India’s ‘mother of all deals with the EU’ – was accompanied by a series of calibrated, unilateral moves through which Trump appeared to insult the Indian Prime Minister.
Trump’s Truth Social post announcing the ‘deal’ is a study in arrogance. The post announcing an important development was published almost around 10.30 PM (IST) well after the business hours, and Trump made it sound as if he was doing Modi a favour by writing that he agreed to the deal “Out of friendship and respect for Prime Minister Modi and, as per his request”. The condescension is apparent.
Similarly, the joint statement announcing the framework for the interim deal was published by the White House at 4 AM (IST) when India was sleeping. To release such an important diplomatic document at that ungodly hour is not only a breach of protocol, but it also it reeks of manipulation. The optics were meant as a slight to the Indian leadership and to offset the hard-earned gains that India acquired through patient negotiation.
In releasing both the Truth Social post and the joint statement at an inappropriate time, Trump was forcing the other side to react, and by front-loading the contentious parts of the framework – that of India’s apparent intent to purchase American goods worth $500 billion or his threats to reimpose tariff if New Delhi “resumes directly or indirectly importing Russian Federation oil” – Trump was reinforcing India’s subservient status in the negotiation.
Trump’s ego leads him to believe that his cleverness knows no bounds, but Prime Minister Modi’s pointed refusal to acknowledge that India has signed a “trade deal” with the US, his strategic silence on the sweeping claims made by the US President and his repeated stress on the fact that it is a
“framework for an Interim Trade Agreement” implies that while headline tariff has been reduced to 25% from 50%, moving to 18% (or even lower, and zero in some cases) will take a lot of work still. It’s also evident from the PM’s statement that mutual trust has completely eroded. New Delhi is wary of Trump’s shifting mood and its consequences and wants to take one step at a time.
Trump’s manipulative behaviour has made what should have been an agreement worth celebrating – given the virtuous cycle that it may trigger –a politically explosive document in India. The Opposition has called the government “weak” and a “sellout”, and activists masquerading as farmers, including some known malcontents, have
jumped into the fray to fish in troubled waters.
The most ridiculous argument running riot on social media goes something like: “how can a deal be fair when one side is imposing 18% and the other side 0%?”
For a start, it isn’t even accurate. India, despite the deal, won’t take its tariffs off the table on many items within the ambit of the deal. Not to speak of sectors where the deal isn’t applicable, such as dairy or core agricultural staples.
Second, the era of 3-4% tariffs by the US is gone. Trump has weaponised the American market for everyone. So be it India, Viet Nam, Bangladesh or Malaysia, tariffs will be paid by everyone to sell their goods to the Americans.
In this scenario, what matters is not the tariff per se but the rate relative to that of our competitors. At 50%, India was priced out of the American market. At 25% leading to 18% we are not only back in the game, but we have a competitive advantage over our peers to access a consumer market that’s richest in the world. In this context alone it is a fair deal.
Apart from this, certain Indian exports such as gems and diamonds, generic drugs and broader pharmaceutical products, smartphones, aircraft parts and machinery parts, clocks and watches, select home décor items will continue to attract zero duty in the US, and that list also includes goods such as tea, spices, coffee and its derivative products, areca nut, cashew nut, chestnut, fruits and vegetables such as avocado, banana, mango, pineapple and mushrooms. This is not an exhaustive list.
It has been alleged that by allowing the US duty free access to certain agricultural goods such as Distiller’s Dried Grains with Solubles (DDGS), soybean oil, red sorghum for animal feed, tree nuts, fresh and processed fruits and wine and spirits, India has “surrendered” to the US.
This is another specious argument. This false narrative is being amplified mostly for narrow political ends, or as clickbait on social media. First, India has kept staple grains and pulses outside the ambit of the deal, along with the dairy sector, meat, poultry and animal products, oilseeds and commercial crops, spices (for import) and fruits and vegetables that are available in India in abundance.
The agricultural items that India will allow, as Harish Damodaran points out in Indian Express, may benefit India’s poultry, dairy and aqua industry due to” increased availability of cheaper and probably better-quality DDGS from the US.”
Damodaran, a noted voice on agriculture and its ecosystem,
writes, “The import concessions that India has given on other agricultural products may not impact its farmers much. India has an import duty of 100% on walnuts, Rs 35/kg on in-shell and Rs 100/kg on shelled almonds, and 10% on pistachios. Removing these will not cause great harm, given that India isn’t a major producer of dry fruit.”
The decision to reduce or eliminate tariffs on certain US industrial goods is not necessarily from a point of weakness. This interpretation harks back to what C Raja Mohan calls “establishment neurosis”. On the contrary, lowering duties is a strategic move. Reducing the cost of ‘high-tech inputs’ may lead to key components in AI infrastructure such as GPUs turning cheaper, that may in turn facilitate building of massive data centers and AI computing clusters, and allow India to move up the value chain. It may also lead to better global supply chain integration. The possibilities are endless.
The agreement explicitly mentions supporting “more resilient supply chains,” with the US intended to treat India as an “aligned partner” for critical minerals and semiconductors through its Pax Silica initiative. This deeper integration suggests that the trade deal is part of a broader ‘economic security alignment.’
Shorn of Trump’s manipulations, the deal is largely a complementary one between a developed and a developing economy and its benefits are evenly distributed. There is no question that the deal is as much a commercial arrangement as it is an instrument of geopolitical alignment. But this is the transformation initiated by Trump, and we either get onto the bus or miss it. For India, the ‘opportunity cost’ of not signing on to the deal would be massive.
I now come to the most contentious part of the deal, the tying of the interim trade agreement with India’s energy policy. There is no denying the fact that Trump’s coercive tactics on India’s purchase of Russian oil has been successful. New Delhi is acting coy, and that alone indicates that certain promises have been made. Though there has been no public statement, but media reports indicate Indian refiners have been
instructed to avoid Russian oil.
By stating in an executive order that the US “shall monitor whether India resumes directly or indirectly importing Russian Federation oil”, Trump has sought to squeeze the space for ambiguity and restrict India’s ‘swing state’ behaviour. It is a clear attempt at putting a price tag on India’s strategic autonomy’.
Trump wants three things with this move. One, force New Delhi into a greater economic and geopolitical alignment with the US, limit its choices by linking energy policy with geopolitical consequences. Two, compel India to buy more American oil. Three, keep India under pressure with the stick of coercion while offering the carrot of partnership.
It hasn’t helped India’s cause that the issue has become a touchstone of heavy political signalling both in India and the US. Trump cannot be seen to be stepping down after slapping India with the tariffs and India cannot be seen to be complying with US pressure.
Between this signalling and defiance, there exists space for negotiations and changing ground realities. For instance, if Ukraine-Russia war comes to an end, it takes the issue off the table. Trump is keen on it, and Europe seems to be coming round to it. We would be wise not to draw conclusions just yet.
(Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.)
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