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Over the past few days, the US–India “trade deal” has triggered wildly different reactions.
Markets have rallied.
Farmers in India are protesting.
Politicians on both sides are claiming victory.
When a single announcement produces that much divergence, it’s usually a sign that the headline is doing more work than the substance beneath it. This is a deal that means something — but probably not what either its loudest critics or its most enthusiastic cheerleaders think.
A reset, not a breakthrough
At its core, the announcement does one very clear thing: it lowers US tariffs on Indian exports to 18 percent, down from an effective rate that had climbed to around 50 percent once penalties were included.
That matters. Those tariffs had become punitive and politically toxic, distorting trade flows and dragging down the broader US–India relationship. Removing them restores a baseline that had become economically unsustainable.
In that sense, this is not a bold leap forward. It’s damage control — a reset after the relationship slid too far in the wrong direction.
Why calling it a “trade deal” is misleading
What has been announced so far doesn’t resemble a traditional trade agreement.
There is no published text.
No legal architecture.
No clarity yet on exemptions, sequencing, safeguards, or enforcement.
That’s an important contrast with India’s agreement with the European Union, signed just days earlier after years of negotiation. The EU deal is dense, rules‑based, and institutionally anchored. The US announcement is leader‑driven, thin on detail, and highly flexible — for better or worse.
This distinction matters for businesses. A rules‑based agreement changes incentives. A political deal changes tone, but leaves underlying uncertainty intact.
The numbers tell their own story
The most eye‑catching claim is that India will buy more than $500 billion worth of US goods, energy, and technology.
Put that in context. Total US exports to India last year — goods and services combined — were roughly $80 billion. India’s entire annual government budget is around $590 billion.
That doesn’t mean ambition is bad. But it does suggest these figures function more as political signalling than as near‑term operational commitments. Supply chains don’t scale six‑fold on the back of a phone call.
Relative advantage, not transformation
From a trade competitiveness perspective, the 18 percent tariff rate gives India a modest edge over some regional rivals. Vietnam, Bangladesh, and Pakistan all face slightly higher US tariffs.
That helps at the margin, particularly for labour‑intensive manufacturing — textiles, apparel, leather goods, furniture — and markets have responded accordingly.
But it’s important not to overstate the effect. A one‑ or two‑point tariff differential does not outweigh infrastructure, logistics, supplier ecosystems, or workforce capability. Trade flows respond to systems, not slogans.
This deal improves India’s relative position. It does not, by itself, rewrite global supply chains.
Why agriculture is the pressure point
The sharpest backlash has come from India’s farm sector, and that reaction is revealing.
Agriculture remains India’s political red line. Nearly half the population still depends on it for income, and previous attempts at reform have triggered large‑scale protests. At the same time, US agriculture is heavily subsidised and aggressively export‑oriented.
Even vague talk of zero tariffs on agricultural goods is enough to trigger alarm, because the downside risks are asymmetric. Whether or not agriculture is ultimately included in the deal, the reaction highlights how sensitive this issue remains — and how limited the political room for manoeuvre is.
Trust, volatility, and what businesses actually price
There is also a deeper issue beneath the tariff headlines.
For decades, US–India relations were deliberately insulated from day‑to‑day domestic politics. Recent tariff penalties — particularly those tied to third‑country relationships like Russian oil — punctured that insulation and re‑politicised the relationship.
This deal eases the immediate pressure, but it does not erase that experience. And for companies making long‑term investment decisions, tariffs are only part of the equation. Volatility and reversibility matter just as much.
So what should we expect?
In the short term, the announcement provides relief: calmer markets, reduced trade friction, and a more constructive diplomatic tone.
In the medium term, the gains are likely to be incremental rather than transformative, with far more structural impact coming from India’s EU agreement than from this US reset.
In the long term, everything depends on whether this evolves into a rules‑based framework with clarity and durability — or remains a politically convenient arrangement, vulnerable to renegotiation.
The bottom line
This is neither a historic breakthrough nor an outright sell‑out. It’s a pause — a recalibration after a period of escalating friction.
What ultimately matters is not what was announced on a phone call, but what follows: the details, the constraints, and whether today’s reset turns into something businesses can actually plan around.
