New Delhi: After the much-celebrated EU–India FTA, a strategic delight by comparison, comes the long-impending India–US trade deal. It is still a work in progress and surfaced in the hush of the midnight hour two days ago. As is now the new normal in Trumpian diplomacy, it was announced directly by the US president on Truth Social. Shortly thereafter, Prime Minister Narendra Modi cautiously reaffirmed only part of that announcement, specifically the portion concerning the reduction of tariffs from 50 percent to 18 percent.
After a flurry of thank-you messages across the Indo-Pacific and photo opportunities involving Dr S. Jaishankar, who is in Washington with Marco Rubio and others, there have been two days of political noise back home amid opposition protests.
This is what we know so far: A trade deal that now seems closer to finalisation has indeed been in the works between India and the United States. Negotiations began even before Trump took office in January 2025. That said, it is still neither concluded nor signed.
The deal became a victim of several forces acting simultaneously, including Trump’s ego and the issue of India importing Russian oil. In a sudden turn of events, Trump, true to form, announced what he described as a breakthrough not through diplomatic channels but on his preferred foreign-policy platform, Truth Social.
Both India and the US acknowledge a lowering of tariffs, but their versions differ. Trump said he agreed to reduce tariffs on India from an effective 50 percent to 18 percent, which he framed as removing a punitive 25 percent entirely and lowering the remaining tariffs to 18 percent. His framing clearly projected the announcement as a political win for his MAGA base amid falling approval ratings and the growing risk of losing the midterm elections in November.
Trump’s account leaned heavily on dramatic claims. Central to his narrative was the assertion that he had opened Indian markets to American farmers, an argument repeated by US trade representatives and the White House press secretary. Trump also claimed he had secured access to Indian markets at zero tariffs while reducing tariffs on Indian exports to the US to 18 percent. He further said India had agreed to purchase $500 billion worth of American products, a figure that currently borders on the impossible.
Most controversially, Trump stated that the deal moved forward because India had agreed to stop importing Russian oil altogether, presenting this as the central breakthrough. That framing was repeated by the press secretary and others in the administration.
In India, before the government issued any formal clarification, the Opposition seized on the announcement. Rahul Gandhi framed the terms as India surrendering to the US. What followed in Parliament was the familiar political disruption rather than a substantive debate on the deal’s terms.
Beyond the noise, several elements of the Indian position merit attention. Commerce and Industry Minister Piyush Goyal clarified that the deal was in its final stages of negotiation but not yet concluded, contradicting Trump’s assertion that it was done. Goyal’s account appears more plausible. Declaring negotiations as deals has long been part of Trump’s political language. In his worldview, a deal can mean intent, progress or aspiration. He has previously announced agreements that never existed on paper and celebrated breakthroughs that collapsed within days. In Trump’s political reality, a deal does not always mean a signed document.
The most sensitive issue concerns Russian oil imports, which the Trump administration has projected as the core reason the deal advanced. On the ground, the picture is more complex. While India’s imports of Russian crude have declined steadily in recent months, they are far from zero. Imports could fall to negligible levels in the coming months, partly to placate Washington and partly to safeguard US-bound exports, but such a shift is unlikely to be immediate. Claims that India will source oil from Venezuela also appear far-fetched.
Reliance Industries has said it has stopped dealing in Russian oil. That does not reflect the position of all Indian refiners, several of which continue to buy from non-sanctioned Russian entities.
India did not import Russian oil before the Ukraine war. Purchases began because steep discounts emerged after G7 sanctions created a price gap. India identified a commercial opportunity, buying discounted crude, refining it domestically and exporting refined products, often back to Europe. This was an economic decision, not an ideological one. That logic collided with Trump’s approach when India was singled out for buying Russian oil, while China, which imports far larger volumes, avoided similar scrutiny because of its rare-earth leverage.
The trade negotiations suffered as a result. Russian oil was recast as a symbol of strategic autonomy in parts of the Indian strategic community and media. What should have remained a commercial debate acquired ideological overtones. Washington showed little patience for this nuance, and the India–US strategic partnership stalled as Trump shifted attention elsewhere.
Two developments appear to have changed the equation. Trump’s approval ratings have declined sharply due to aggressive immigration enforcement, erratic foreign policy and internal Republican divisions ahead of the midterms. At the same time, Trump was reportedly unhappy with India and the European Union advancing their own trade talks earlier in January. A deal with India, the world’s fastest-growing major economy, became strategically useful. Trump needed a deliverable.
India’s leadership exercised patience as Russian-oil imports declined without emphatic public statements. Prime Minister Modi skipped multiple opportunities to meet Trump. Negotiators continued working quietly in Washington. It may not have been ideal, but it proved the most workable approach.
Even without final details, some positives are evident. The India–US strategic partnership remains globally consequential. While uncertainty persists, the announcement signals a willingness on both sides to move past a prolonged impasse. The 18 percent tariff figure is not the key achievement. It can be renegotiated.
Critics point out that India’s tariffs were once around 2 percent, questioning the value of an 18 percent rate. This overlooks the Generalised System of Preferences, which benefited India for decades and was withdrawn by Trump in his first term. The focus on tariff arithmetic reflects Trump’s worldview, flawed but unavoidable in negotiations.
India cannot open agriculture and dairy wholesale to the US. Agricultural reforms previously failed, and these sectors were kept outside EU trade talks as well. Full liberalisation would risk farmer unrest and threaten livelihoods tied to nearly 42 percent of the workforce. Limited concessions are possible, but sweeping opening is unlikely. According to recent reports, India has opened some agricultural segments, though broader claims remain speculative.
The claim that India will buy $500 billion worth of American goods is implausible. Trump has made similar assertions with Japan, the EU and others without clarity on timelines. The figure should be read as signalling a push for higher imports over time, not a concrete target.
The announcement has revived a partnership that had stalled through much of 2025, though trust eroded over the past year will not be quickly restored. There have, however, been immediate effects. The rupee, recently the weakest currency in South Asia, strengthened sharply after the announcement. Equity markets also rebounded briefly, reflecting renewed investor confidence.
The episode underlines a broader truth. India’s most urgent challenges lie at home. Without structural reforms and better investment conditions, India will continue to lose manufacturing opportunities to Vietnam, Indonesia and others. Make in India and PLI schemes aimed to raise manufacturing’s share of GDP have underperformed. Without a stronger manufacturing base, imports will rise, particularly from China, even as exports to the West grow.
India–China trade has crossed $155 billion, with a large deficit on India’s side. Against this backdrop, marginally lower tariffs than peers offer little comfort. China, despite facing high tariffs, prepared for trade wars by diversifying exports across regions. Lower tariffs alone are not a cause for celebration. They are a reminder that internal reform is essential if geopolitical openings are to translate into lasting economic strength.
I will return to the details of the India–US trade deal once official information emerges. Until then, speculation should be avoided.
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