Hope and Uncertainty as India and US Strike Long-Delayed Trade Deal
US President Donald Trump’s decision to reduce reciprocal tariffs on Indian goods from 50% to 18% has brought a wave of relief to Asia’s third-largest economy. Yet, uncertainty lingers as the precise terms of the agreement remain unclear.
India had been paying some of the highest tariffs in the world after the Trump administration raised duties on Indian imports from 25% to 50% last August. Washington justified the move by accusing New Delhi of financing Russia’s war in Ukraine through its purchase of discounted Russian oil.
Following a phone call with Prime Minister Narendra Modi on Monday, Trump claimed that the Indian leader had “agreed to stop buying Russian oil and purchase much more from the United States, and potentially Venezuela.”
India has not directly responded to these assertions, but Modi expressed gratitude “on behalf of 1.4 billion Indians for this wonderful announcement,” adding that he hoped the two nations would take their partnership to “unprecedented heights.”
Relief After Months of Strain
The breakthrough marks a significant turnaround after months of tension that had strained carefully cultivated ties between Washington and Delhi. Indian exports to the US—particularly in job-intensive sectors such as textiles, seafood, and jewellery—had fallen sharply under the weight of higher tariffs.
The uncertainty also pushed India’s traditionally protectionist government to accelerate trade diversification. Just last week, New Delhi and the European Union unveiled what officials called “the mother of all trade deals,” eliminating tariffs on 80–90% of goods. It was India’s ninth free trade agreement in four years, signed while negotiations with Washington appeared stalled.
Indian industry has largely welcomed Trump’s announcement.
“While the devil is in the details, this removes a hanging sword over the rupee, equity markets, and interest rates. Let us hope it proves a win-win deal for both countries,” said fund manager Nilesh Shah.
Boost for Manufacturing and Textiles
The new 18% tariff brings India in line with regional competitors such as Vietnam, Thailand, and Bangladesh, which face duties ranging from 19% to 40% on US imports.
“This greatly enhances India’s appeal as an alternative to China in global supply chains,” noted Shilan Shah of Capital Economics. “India offers advantages that many other hubs cannot—low labour costs, political stability, and a vast domestic market that provides a hedge against future tariffs.”
Textile exporters were among the first to cheer the development. The Confederation of Indian Textile Industry said the deal would enable them to “compete effectively in the US market, the single-largest destination for Indian apparel exports.”
Experts Urge Caution
Despite the optimism, trade analysts warn that many questions remain unanswered.
“Trump’s Truth Social post leaves major gaps—what products are covered, what the timelines are, and whether India has truly agreed to zero tariffs and non-tariff barriers, especially in sensitive sectors like agriculture,” said Ajay Srivastava of the Global Trade and Research Initiative (GTRI).
US Agriculture Secretary Brooke Rollins stated that the agreement would allow America to export more farm products to India, helping reduce Washington’s $1.3bn agricultural trade deficit. But New Delhi has remained silent on this politically sensitive issue, as nearly half of India’s population depends on agriculture for its livelihood.
GTRI also questioned Trump’s claim that India had committed to buying over $500bn worth of American energy, technology, and agricultural goods—far above India’s current annual imports from the US, which are under $50bn.
“Until there is a joint statement and a negotiated, enforceable text, this should be seen as a political signal rather than a concluded trade pact,” Srivastava cautioned. “Caution, not celebration, is warranted.”
Geopolitical Undercurrents
Beyond economics, the deal carries major geopolitical implications. Over the past year, India had drawn closer to Russia and China as Trump’s tariff war intensified. In September, Modi, Vladimir Putin, and Xi Jinping displayed rare camaraderie at the Shanghai Co-operation Organisation summit—an image widely viewed as a message to Washington.
India has long balanced relations between competing global powers. But analysts believe the thaw with Trump could tilt Delhi once again toward the US camp.
“Many in India prefer strategic autonomy,” said Shah. “However, if this rapprochement proves durable, India is likely to gravitate back toward the US bloc.”
For now, the agreement represents a hopeful first step after a prolonged impasse. Whether it evolves into a comprehensive, mutually beneficial partnership will depend on the fine print—and on the political will in both capitals in the months ahead.
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