By Amitendu Palit
The official confirmation of the US and India having finalised a bilateral trade deal comes within a week of India pulling off a free trade agreement (FTA) with the European Union (EU). The timing of the announcement of the US deal, therefore, is significant. It might also be the “Brussels effect” brushing off on Washington!
What does the conclusion of the deal finally bring home?
India’s biggest relief will come from the US tariff cuts. Reciprocal tariffs of 25% on Indian exports will be rolled back to 18%, bringing them on a par with those on most exports from Southeast Asia and East Asia. The additional 25% tariffs on India for buying Russian oil is also expected to be rescinded, bringing further relief for exports to the US market.
India, in return, is expected to purchase large amounts of US exports, especially energy, tech and agricultural products. President Trump’s post on Truth Social suggests such purchases will be of around $500 billion. In addition, as demanded by the US for long, India will significantly reduce its purchase of Russian oil, increase crude purchases from Venezuela, and lower its own trade barriers on domestic sectors of US export interest.
The key interest in the deal now will be in checking its content, especially what India conceded in terms of market access, and what it obtained in return. This will be especially important given the spate of FTAs India has signed recently. There will be great interest in comparing the relative concessions that India has offered in its various FTAs.
Concessions, Context and the Shifting Negotiating Table
While waiting for the details, it is important to take a step back and look at how the deal evolved. It is almost exactly a year ago in February 2025, when Prime Minister Modi visited Washington. He was one of the earliest global leaders to meet President Trump in person after the latter’s second entry into the Oval Office. The joint statement released on the occasion of the visit indicated a mutual intention to negotiate the first tranche of a mutually beneficial bilateral trade agreement by the fall of 2025. The multi-sector agreement, as the joint statement further suggested, would work on increasing bilateral trade in goods and services by cutting down tariff and non-tariff barriers and deepening supply chain integration. The trade agreement was expected to fulfil the goal of Mission 500—aiming to double bilateral trade to $500 billion in 2030. The statement also appreciated the mutual efforts made till then to increase bilateral trade. These included India’s lowering of tariffs on bourbon, motorcycles and tech products, and the US’s measures for enhancing Indian exports of mangoes and pomegranates.
India’s benefits/costs from the trade deal it will eventually enter into with the US should be evaluated on the basis of conditions that existed last February.
In February 2025, the US had not pronounced reciprocal countrywide tariffs. These were announced in April and kicked in from August. Most of the countries that were imposed with reciprocal tariffs were able to cut deals with the US. In almost all cases, the initial reciprocal tariffs were reduced. India was a notable exception. Not only did India not reach a deal with the US, but it also got slapped with additional 25% secondary Russian tariffs.
With 50% tariffs facing a large chunk of its exports, especially the labour-intensive ones, India’s negotiating room was significantly cramped. The core objective of negotiations shifted to complying with US demands, which had to be fulfilled for withdrawing the tariffs. With the goalpost having shifted while the game was on, India’s hopes of getting concessions from the US, over and above the situation that existed in February 2025, were effectively demolished.
Obviously, this was so not just for India but for many of its competitor economies from South and Southeast Asia. In India’s case, however, two factors made the pill more bitter. The first was India getting reciprocal tariffs in April even while it was negotiating a deal with the US from before. The second were the additional Russian tariffs.
There were signals of US demands being met by India over the last few months. This included a long-term deal signed by Indian state-owned oil marketing companies for buying more than 2 million metric tonnes of liquefied petroleum gas in 2026. Another significant step was the Indian parliament amending the Civil Liability for Nuclear Damage Act by removing supplier liability and bringing in an upper threshold for operator liabilities. These measures ensure greater energy trade between India and the US along with establishing enabling conditions for more US energy investments in India. Considering that India has already reduced its purchase of Russian oil, it has been effectively complying with US demands for quite some time.
The details of the deal will reveal what more India will concede and what might it obtain in return. But the conclusion of the deal should not bring in strategic complacency. India is vulnerable to more unilateral tariff actions from the US due to its membership of the BRICS and trade with Iran. Furthermore, the recent example of Korea being threatened with additional tariffs for being late in fulfilling the conditions of the trade deal it signed with the US, should also be taken note of. Reaching a deal with the US might not mean the end of the story at all. Rather it should be looked at, at best, as a temporary pause. India should continue its efforts to diversify and de-risk by seeking FTAs with other countries.
The author is a Senior Research Fellow and Research Lead (Trade and Economics) at the Institute of South Asian Studies, National University of Singapore.
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.