End In Sight: On The US-India Trade Deal, America’s Tariffs

The United States has announced a significant reduction in import tariffs on Indian goods, lowering them from 50% to 18%. 

The Nature of the Deal- Trump-Style Diplomacy

•  Personality-Driven Diplomacy: President Donald Trump announced the move via social media before any official channels or agreements were finalised.
  • The move highlights how international relations are increasingly driven by personal rapport between leaders.
• Lack of Specifics: While the Commerce Minister confirmed the development, it remains unclear if this is a Free Trade Agreement (FTA), a mini-deal covering only specific items, or just a tariff reduction.
• Reciprocity: In international relations, there is “no free lunch”; if the US reduces tariffs, India is expected to offer something significant in return.

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Key Economic & Geopolitical Implications

• The Russian Oil Catch: Donald Trump claims Prime Minister Modi agreed to stop purchasing Russian oil in exchange for better trade terms. 
  • Currently, Russia provides one-third of India’s oil at discounted rates, helping control inflation.
  • Russia is an “all-weather friend,” providing vital military hardware such as S-400 systems and Sukhoi jets. 
  • Alienating Russia could push them closer to China and Pakistan, especially since the US has historically provided fighter jets to Pakistan and offered limited help during “Operation Sindoor.”
• Technical Constraints: While Venezuela is an alternative, its crude is heavy and requires specialised, expensive refining technology. 
  • Furthermore, alternative oil sources, such as those from Saudi Arabia or Iraq, are more expensive.
• Impact on Industry: The 18% tariff specifically benefits labour-intensive sectors such as textiles (Tirupur), leather (Kanpur), and footwear. 
  • However, India still faces competition from Vietnam and Bangladesh, which enjoy duty-free access under “Most Favoured Nation” status.
• Expanded Export Range: Other sectors, such as auto parts and machinery, are also expected to see increased exports to the US due to lower costs.
• Make in India: Combined with potential trade deals with the European Union, this access could elevate the “Make in India” initiative to a global level.

Domestic Concerns and Policy Shifts

• Shift in Policy: The deal reflects a potential shift in India’s long-standing non-alignment policy, moving closer to the US orbit.
• Protected Sectors: The Indian government has maintained that its sensitive agriculture and dairy sectors remain fully protected and will not be opened to cheap US imports.
• Need for Debate: Critics argue that a decision of this magnitude—effectively shifting foreign policy—should be debated in Parliament rather than made by the executive alone.

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Conclusion

The India–U.S. trade deal offers short-term economic relief. For a decision with long-term economic and geopolitical implications, clarity and institutional accountability are essential.

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