3 min readFeb 18, 2026 11:13 PM IST
First published on: Feb 18, 2026 at 11:13 PM IST
The costliest tariff right now is confusion. In the published US-India Joint Statement, the two sides say they have reached a framework for an Interim Agreement, while reaffirming a pathway toward a broader Bilateral Trade Agreement that would be built out over time. The Statement also specifies a reciprocal tariff rate of 18 per cent on originating goods from India at this stage and notes that broader tariff reductions are tied to the successful conclusion of the Interim Agreement. This is an important distinction suggesting a politically announced staging mechanism rather than a fully concluded, legally consolidated FTA with final schedules, binding annexes, and settled dispute disciplines.
Now, trade under Trump is not primarily presented as technocratic harmonisation; it is used as a bargaining tool and a form of leverage. That approach rewards strong claims at the announcement stage, but it also raises the domestic cost of later recalibration, especially when early interpretations run ahead of what negotiators can lock in. India’s best response, therefore, is neither rhetorical escalation nor defensive ambiguity. It is disciplined sequencing: Defining stages with credible boundaries, specifying what is out of scope for Stage 1, and signalling the domestic process and institutional steps that would govern Stage 2.
Why does confusion become economically costly so quickly? Because it behaves like a shadow tariff. It shows up as deferred shipments, paused capex, cautious inventory behaviour, delayed hedging decisions, and an added risk premium on compliance and regulatory exposure. In farm-linked chains, transmission is even faster because expectations adjust immediately, and political signalling amplifies market reactions.
The Russia angle adds another layer where clarity matters. Washington’s public messaging has attempted to link trade concessions to India’s energy choices. India’s official position remains anchored in a core macroeconomic stability: energy security for 1.4 billion Indians, with diversification guided by market conditions and evolving international dynamics. Any credible exit from overreliance on a particular supplier ultimately hinges on supply assurances, pricing stability, shipping and insurance constraints, and long-term contracting options. Trade frameworks can broaden the menu of feasible options, but they cannot substitute for the underlying economics of energy security, nor can they be sustained if framed as a morality play rather than a commercially viable transition.
The decisive terrain, however, lies beyond headline tariffs. Whether the deal becomes usable in practice will be determined by the “rules layer”: standards, conformity assessment, technical barriers to trade, digital trade provisions, and the compliance pathways that turn nominal market access into operational market access. The difference between a stabilising agreement and a politically brittle one often lies in whether compliance design is predictable, consultative, and phased in a way that matches administrative capacity.
In this context, “clarity” is best understood as reducing interpretive space without pre-empting negotiation. That requires a disciplined public articulation of scope that separates what the interim framework covers from what is explicitly excluded and deferred, paired with a sequencing roadmap. It also requires treating implementation capacity as a core part of the bargain, especially for smaller firms that face the highest adjustment costs. Finally, both sides should resist using ambiguity as a bargaining device.
The writer is a fellow, Centre for New Economic Diplomacy, ORF
