India’s recent trade agreement with the United States is being celebrated by the government at the Centre as a significant milestone in its economic diplomacy. Beyond the headlines, a closer scrutiny makes the deal appear rather dicey right from the very outset. Four days after US President Donald Trump announced the deal on social media on 2 February, a joint statement was issued by both governments on 6 February at 5 AM Indian Standard Time. It is clearly known that in diplomacy, timing is messaging. This particular statement was pushed out at a time when Indians were asleep, making it look obvious New Delhi was a party that simply signed on but had no role in shaping the deal. Perhaps this explains why India agreed to reduce its tariffs on American industrial and agricultural goods to ZERO per cent while Indian exporters still face 18 per cent US tariffs.
The publicity claiming US tariffs came down from 50% to 18% is completely misguiding. 25% tariff was slapped on India for purchasing oil from Russia. That was removed once the assurance was given by India that no more petroleum would be purchased from Russia. Any claim of ‘strategic autonomy’ is therefore meaningless.
In financial year 2024–25, bilateral trade between India and the US was worth over $131 billion, with Indian exports at around $86.5 billion and imports about $45.3 billion. That left India with a trade surplus of roughly $40–41 billion, up from $35.3 billion the previous year. At first glance, this surplus might seem comforting, but there’s a deeper imbalance in the trade structure. For, our exports are heavily focused on sectors like pharmaceuticals, telecom equipment, precious stones, gold jewellery, and textiles. Even with growth, these industries work on slim profit margins in highly competitive global markets.
On the flip side, imports from the US are heavily tilted towards fuels, machinery, electrical equipment, and aircraft parts. India doesn’t have strong domestic capabilities in these sectors. In the interim trade framework agreed by both countries, India has indicated its intent to import $500 billion worth of American goods in five years. In other words, it would imply importing US$ 100 billion only American goods annually. Critics point out that achieving this target would mean India becoming the largest buyer of US goods, taking in imports far beyond what current economic conditions allow. Economists have cautioned that this could diminish India’s carefully nurtured trade surplus with America. For Indian farmers and small manufacturers, the stakes are particularly high. Agriculture contributes about 17 per cent of India’s GDP while employing over 40% of the labour force, supporting millions of rural households.
Yet, the deal’s push for greater imports risks overwhelming local markets with subsidised US agricultural products, which could hurt domestic prices and farmer incomes. Farmers’ organisations that took part in a nationwide protest on 12 February continue to strongly criticise the trade agreement, warning of serious consequences for Indian agriculture.
The Samyukt Kisan Morcha (SKM), one of the country’s largest farmer unions, has termed the deal a “total surrender” to US interests. A major concern is the proposed import of farm products at zero or low tariffs, along with two animal feeds from the US, distillers dried grains (DDGS) and red sorghum, which farmers claim may contain genetically modified (GM) components which could, over time, creep into human body. Farmers are apprehensive that these imports could undercut Indian produce such as apples, cotton and soybean, while also opening the door for GM material to enter the domestic market through cattle feed. SKM has questioned why such animal feeds are being imported at all, arguing that farmers have never demanded them. It has also flagged concerns over the possible presence of non-vegetarian components in the feeds. DDGS imported from the US is largely derived from GM corn and GM soy. Also, with American apples and dry fruits expected to enter India duty-free or at reduced tariffs, farmers in Himachal Pradesh and Jammu and Kashmir are already bracing for a potential fall in prices of domestic produce. Lower to zero tariffs on industrial goods could hurt Indian MSMEs, the backbone of the country’s job market, in sectors such as machinery, auto components, electrical goods and chemicals.
Once Indian markets are flooded by cheaper yet better-branded American goods, many MSMEs, especially those operating on thin margins, will find it difficult to survive. Coming to the textile sector, a vital source of employment for millions, Indian exporters face an 18 per cent tariff in the US market, while competitors like Bangladesh and others enjoy a zero per cent tariff, giving them an immediate price edge. Bangladesh’s preferential access to the US market, a result of Dhaka’s successful negotiations with Washington, threatens to shift orders away from Indian producers. Even more concerning is the opacity clouding the trade agreement.
A deal with such significant ramifications for job creation, rural incomes, and India’s industrial future deserves thorough parliamentary debate and independent economic impact assessments, which are missing. In its eagerness to secure a headline-grabbing trade agreement with Washington after being punished with 50 per cent tariffs on India’s exports to the US for about six months, the government seems to have panicked and overlooked the country’s long-term economic interests and neglected safeguards for vulnerable sectors such as agriculture and MSMEs. Given the prevailing economic conditions in the country – rising cost of living, a falling rupee, widening inequality, massive unemployment, stagnant wages and rural distress – a trade deal negotiated from a position of strength, not concession, would have benefited Indians. Sadly the nation has been failed once again.