Dr. Arvind Kumar*
Barely a year after the United States imposed a punishing 50% tariff wall on Indian exports, India has negotiated its way out of what many described as Washington’s trade penalty box. The tariff reduction to 18% lower than what some Asian competitors face is being celebrated in New Delhi as a diplomatic and economic breakthrough. It is also a notable retreat from the harsher 26% reciprocal rate that had earlier been floated under US President Donald Trump’s protectionist trade push. On the surface, this is a public relations victory for Prime Minister Narendra Modi, reinforcing his government’s narrative that strategic patience and diplomatic engagement can deliver results. President Donald Trump framed the deal squarely in political terms, adding that India would “likewise move forward to reduce their tariffs and non‑tariff barriers against the United States, to zero.” Prime Minister Narendra Modi, for his part, celebrated the breakthrough. Commerce and Industry Minister Piyush Goyal has dubbed the agreement “a historic turning point that will reshape India–U.S. relations and accelerate our journey towards Viksit Bharat 2047,” Yet, as negotiations transition into implementation, a critical question remains will this ambitious agreement translate into tangible policy action and balanced economic gains in global trade diplomacy? Will President Donald Trump’s anticipated March visit successfully formalise the next phase of the India–U.S. trade agreement and unlock tangible investment and regulatory clarity? Can the final framework balance expanded market access with protection of domestic industries and India’s long-term trade autonomy? Will the engagement emerge as a transformative milestone in bilateral economic relations, or expose implementation challenges behind political commitments?
But as with most trade breakthroughs in an era defined by geopolitical rivalry, the headline number tells only part of the story. The agreement, announced through political statements and executive action, still requires detailed institutional clarity. More importantly, the real question is not just what India gained but what commitments it may have quietly accepted in return. The rollback of US tariffs on Indian goods to 18% offers New Delhi significant relief. Yet, the strategic commitments tied to the deal could shape India’s energy security, trade autonomy and geopolitical positioning for years to come.
A WAKE-UP CALL
The threat of losing preferential access to the United States, India’s largest export destination, appears to have triggered an overdue recalibration in New Delhi’s trade posture. For decades, India maintained a cautious and often protectionist approach toward global trade integration. The tariff shock from Washington forced policymakers and industry leaders to accelerate negotiations with alternative partners, including long-pending agreements with the United Kingdom and the European Union. Some non-tariff barriers, particularly those linked to quality certification and compliance standards, have also begun to soften under export sector pressure.
At a geopolitical level, the tariff confrontation coincided with India cautiously reopening channels of engagement with China, strained since the 2020 border crisis. While economic rapprochement remains limited, the broader strategic message is clear: tariff vulnerability exposed the risks of overdependence on a single export market.
Yet diversification is easier said than done. For three decades, Indian exporters from textile manufacturers and jewellery traders to software service providers have treated the US as their most reliable buyer. The combined pressure of trade tariffs and tightened work visa norms for Indian technology professionals had begun to unsettle this deeply embedded economic relationship.
The economic consequences were already visible. India’s recent federal budget included provisions aimed at cushioning exporters and managing potential fiscal spill-overs from reduced US demand. Market sentiment, too, had turned cautious as investors worried about supply-chain disruptions and shrinking export margins.
The tariff rollback has eased these immediate concerns. But the strategic undertones of the agreement are difficult to ignore. President Trump has publicly stated that India will reduce tariffs and non-tariff barriers on American goods to near zero while committing to purchase over US$500 billion worth of US energy, technology, agriculture, coal and industrial products. Indian officials, while welcoming the deal, have refrained from endorsing the full scope of these commitments.
The most sensitive issue revolves around energy imports. Washington has repeatedly suggested that India agreed to curtail purchases of Russian crude oil. New Delhi, however, has emphasised that ensuring affordable and reliable energy supply remains a national priority. Has India agreed to an immediate halt in Russian imports or merely a gradual reduction? The distinction is crucial. Russian crude has played a major role in stabilising India’s fuel prices over the past three years, offering discounted supplies that significantly improved refinery margins. Replacing these imports abruptly could increase procurement costs and strain public-sector refiners responsible for supplying fuel to a population of over 1.4 billion people.
The emerging contours of India’s future energy basket under the agreement suggest a complex geopolitical balancing act. US shale-derived oil and liquefied natural gas are likely to occupy a larger share of India’s import portfolio. At the same time, Venezuela has re-emerged as a potential alternative supplier, particularly for private refiners capable of processing heavy crude grades. Reliance Industries, operator of the world’s largest refining complex in Jamnagar, appears central to this transition. Historically, the company imported substantial volumes of Venezuelan crude before US sanctions forced a halt. Reports indicate that it is now seeking fresh approvals from US regulators to resume purchases, positioning itself as a compliant intermediary between sanctioned suppliers and global fuel markets.
However, even as India navigates energy recalibration with Washington, its strategic engagement with Iran presents another delicate diplomatic equation. India and Iran formalised their partnership through a 10-year agreement signed in 2024, under which New Delhi committed financial and operational support to develop and equip the Shahid Beheshti terminal at Chabahar. India has reiterated that it considers Chabahar a strategically important project and continues to engage diplomatically with both Tehran and Washington to sustain its participation. This represents India’s attempt to diversify trade routes, enhance regional logistics resilience and strengthen geopolitical leverage across Eurasia. Any disruption to its operations could ripple across supply chains linking India to Central Asia, Russia and Europe, underscoring how infrastructure diplomacy increasingly intersects with global power politics.
This arrangement raises important questions. By controlling sanctions waivers and trade permissions, does Washington gain indirect influence over India’s energy and connectivity security? And could India’s diversification away from Russia inadvertently deepen reliance on US geopolitical goodwill while simultaneously constraining its engagement with Iran?
In the short term, the trade deal offers tangible economic benefits for India. Lower tariffs restore competitiveness for labour-intensive industries such as garments, footwear, leather goods, engineering products and processed food exports. These sectors employ millions of workers and form the backbone of India’s small and medium enterprise ecosystem. The agreement also aligns with the government’s industrial push under the Make in India and Design in India initiatives, potentially encouraging manufacturing investment and job creation.
Additionally, economists argue that India’s relatively undervalued currency could amplify export gains, strengthening external sector stability at a time of fragile global demand. For the United States, the economic gains are more dispersed but strategically valuable. Increased access to India’s energy, aviation, technology and agriculture markets offers long-term commercial opportunities while reinforcing Washington’s objective of integrating India into Western-aligned supply chains.
The most politically sensitive aspect of the agreement may lie in agriculture. Will India reduce restrictions on genetically modified crops or allow greater access for subsidised American agricultural products? Such steps could expose Indian farmers already operating with smaller landholdings and limited state support to intense global competition. India’s ethanol blending programme, which consumes large volumes of agricultural feedstock, could also become a point of negotiation if US corn exports are positioned as an alternative input. Yet integrating imported agricultural commodities into domestic fuel or food supply chains remains socially and politically contentious.
Beyond energy, agriculture and connectivity, several unanswered questions linger. Could expanded defence procurement from the United States reduce India’s historical reliance on Russian military equipment? Will the agreement grant India greater access to advanced semiconductor technology and artificial intelligence infrastructure? And will US digital commerce platforms receive regulatory concessions in India’s rapidly expanding consumer market? Each of these sectors carries long-term strategic implications that extend far beyond trade statistics.
WAY FORWARD
Ultimately, the India-US trade deal reflects a broader shift in global economic governance. Trade, energy flows and technology transfers are increasingly being deployed as instruments of geopolitical alignment rather than purely commercial transactions. For India, the tariff reduction provides immediate economic breathing space and strengthens its position in global manufacturing supply chains at a time when companies are diversifying away from China. However, the sustainability of these gains will depend on how effectively New Delhi navigates the strategic conditions attached to the agreement.
If India uses this opportunity to upgrade industrial capacity, diversify energy sources and protect vulnerable domestic sectors, the deal could indeed mark a turning point in its economic trajectory. But if tariff relief translates into deeper strategic dependencies, the celebration may prove premature. For now, India appears to have negotiated a favourable bargain. Whether it remains so will depend on the fine print and on how skilfully New Delhi balances economic ambition with geopolitical autonomy.
*Editor, Focus Global Reporter
