DC Edit | US Trade Deal: Benefits For India May Come At A Cost
The positive side will, of course, be rosy for Indian traders as their export competitiveness will increase several folds since India has been favoured with 18 per cent reciprocal tariffs, which is the least among the emerging economies except South Korea
The pop and fizz emanating from the uncorking of an (interim) India-US trade deal are pleasantly intoxicating. The deal, which has come to the table in close to a final form after months of start-stop negotiations, might be more symbolic than economic for the US, the world’s largest economy. For India, it is a significant moment in swirling global geopolitics as it augurs well for a resetting of ties that were going sour in the months since Aug. 6, 2025 because of tariff tensions.
The devil might lie in the details, but there is no denying that India is agreeing to the deal at a cost to come in terms of scaling down even more on the purchase of Russian oil, which means the average landed cost of each barrel of crude oil will be far dearer to the nation. It is moot whether India has surrendered entirely its policy of strategic autonomy and all the efforts it put into diversification of trade sources to sign on the dotted line with the Trump administration.
Besides the potential rise in the cost of oil that will be even more if India were to transport crude from the US and Venezuela, there is the troubling question of what agricultural products India will have to buy from the US and whether any or all of it will affect the livelihood of hundreds of millions of farmers and workers who may likely constitute half the Indian population of 1.4 billion. To cover its agricultural trade deficit of $1.3 billion in 2024, rural America might wish to offer much more of its almonds, pistachios, cotton, soybeans, dairy, poultry, ethanol, apples, pulses and seed oil.
The positive side will, of course, be rosy for Indian traders as their export competitiveness will increase several folds since India has been favoured with 18 per cent reciprocal tariffs, which is the least among the emerging economies except South Korea. For instance, India’s two per cent tariff advantage over Bangladesh and Sri Lanka might provide an impetus primarily for exporters of garments, besides benefits for gems and jewellery, footwear, chemicals, fish (shrimp), auto parts and electrical equipment sectors.
Beyond trade, the shifting geopolitics may stop the decline of the Rupee against the US dollar, embolden American investors to return to India, keep the stock markets buoyant after foreign investors took out $18.8 bn in 2025 and $3.1 bn in Jan. and stabilise the supply chains out of India that can be relied upon to deliver smoothly enough to compete with China, especially with this new and favourable tariff positioning. The ball will be in the court of India Inc. and businesses and traders to make hay.
Domestically, the government could do much more towards being transparent on the deal than it has been so far, notwithstanding the commerce minister’s ebullient media briefing. Only the broad contours have been made visible thus far in Mr Trump’s announcements that have led the subject but then the US President’s showmanship is a given while Mr Modi’s circumspection adds a touch of mystique to the deal.
Whether the US goes further to contribute positively towards shoring up India as a counterweight to China remains to be seen, as much as whether there will be a wholesome pivot in strategic ties. As of now, the disappearance of a major irritant has lent the atmosphere a sanguine hue even if both Mr Trump and Mr Modi may have been under pressure to bring this rapprochement about.
