There are question marks over the winding down of Russian oil purchases, and more importantly, other imports by India that include defence equipment and spares.
From being first off the blocks for a trade deal with the US, India is now among the last set of countries to ink a deal with Washington DC. Monday, it is being said in jest, was perhaps finally the turn for countries with names starting with ‘I”, given that Indonesia managed its deal just hours before India’s pact was announced.
Prima facie, an 18 per cent headline “reciprocal tariff” places India in a reasonably good position against competitors such as Vietnam, Bangladesh, Malaysia and China in terms of accessing the American market, but the fine print of the deal would really hold the key to how favourable it is from New Delhi’s perspective. Within this headline, tariff too, there might be three buckets: Most products that will come under the 18 per cent bracket, some like steel and aluminium that were tariffs outside of the US IEEPA, and so could stay outside the ambit of the so-called reciprocal tariffs, and items such as pharmaceuticals and electronics that are broadly exempt from tariffs while entering America.
Now, how good an 18 per cent tariff is depends on the vantage point from which this is viewed: Before Donald Trump’s tariff policies were implemented, Indian goods entering the US were tariffed at an average of just 2.5 per cent. Post-Trump 2.0, though, this went up progressively to 50 per cent, so that is perhaps the more relevant starting point now. And the fact that even countries with a trade deficit with the US have ended up with 10-15 per cent tariffs. So, 18 per cent might not be bad at all.
The big question, though, is what it took to get 50 per cent down to 18 per cent. With Trump, it’s always the art of the squeeze. Given that getting down to 18 per cent would have involved some serious concessions, the devil really could be in the details, as multiple analysts that The Indian Express spoke to said on the issue. Two things have been put out by DC. One, Trump’s claims that India has committed to buying more than $500-billion worth of American goods, including energy, technology, agriculture and coal products. Two, US Agriculture Secretary Brooke Rollins’s statement that the trade deal will improve access to American farm products to “India’s massive market”. What are the tariffs and non-tariff measures that have been promised by the Indian negotiators to get to 18 per cent? More importantly, what were the sweeteners thrown in over the last couple of weeks?
The $500-billion figure is likely among these. It is an eye-catching number, and ties in with Trump’s other deal announcements that came with a lot of big-ticket numbers, as was the case in the South Korean trade deal or the one with Japan. But for context, India’s cumulative goods imports in FY25 stood at $720.24 billion. Clearly, while these figures pander to Trump’s obsession with big numbers, they may or may not be realised. It has not been specified over what period that $500 billion will be attained, and the items that it entails. While it is certainly true that the US will export more to India, what is not clear is the time frame and what items this incremental import figure applies to. Does it go far beyond the items that India was pushing for: Defence equipment, aviation gear, nuclear reactors and tech hardware? There are perils too. Earlier last month, Trump said he is raising tariffs on South Korean goods, including automobiles, lumber and pharmaceuticals, accusing the country of reneging on investment commitments under a trade deal struck last year. That is a clear and present danger.
The bigger question is whether deal applies to India’s agricultural sector as well. Trump did mention agri products and Rollins specifically tweeted about the farm export opportunity offered by India. This comes amid farmers’ concerns over a surge in imports of US farm products as Washington is considered to be among the world’s largest agricultural subsidisers. And India is unlikely to have caved in on this, or other significant red lines it had drawn in its offer earlier last year.
While it remains unclear which agricultural product categories have been opened, US trade deals under the Trump administration have had an aggressive emphasis on agriculture. The US not only sought market access for agriculture in all of the trade deals struck under Trump’s second term, but also renegotiated deals to include farm products during the last 12 months alone. There are some calling the India-US deal an answer to those thinking the EU is gaining on the US vis-à-vis trade. The deal with the EU could have possibly catalysed action from the Trump administration.
There are question marks over the winding down of Russian oil purchases, and more importantly, other imports by India that include defence equipment and spares. But then, the wider consensus is that the additional tariffs were never really about Russian oil. Also, Russian oil may be down in India’s import basket, but it still accounts for a quarter of the total imports.
A convergence between the two countries on addressing the reciprocal tariff issue was achieved over the last week, with a number of “sticky issues” having been addressed. There is an expectation that New Delhi will offer some clarity on how these issues were negotiated. What is also clear is that extreme care will be taken to not fact-check Trump or his cabinet colleagues on the claims made from DC on the deal.
The writer is national business editor, The Indian Express. anil.sasi@expressindia.com
