We should welcome the India-US trade agreement but need to parse the fine print

The joint statement issued by the White House says that this is a framework for an interim agreement, with negotiations due for a broader bilateral trade agreement.

Apart from the US commitment to apply an 18% reciprocal tariff on Indian goods, it signals tariff removals (or adjustments) on a “wide range of goods” contingent on the successful conclusion of talks, with sectoral references spanning textiles and apparel, leather and footwear, home décor, artisanal products and certain machinery, among others. It also emphasizes rules of origin, easing of non-tariff barriers and a pathway to digital trade rules in an eventual agreement.

That is already a clue for sober readers: the market is reacting to a direction of travel. The economic outcome will depend ultimately on the terms of arrival.

An 18% tariff is better than what most other US partners face, so it gives India a competitive edge, especially in some labour-intensive categories like garments, footwear and home-textiles. Orders can shift quickly as buyers diversify supply chains. But bear two cautions in mind. First, tariffs are only one part of the landed-cost equation. Compliance costs, standards, logistics, lead times and rule-of-origin documentation can eat away the advantage. Rules of origin will involve tight scrutiny and heavy paperwork for which our MSMEs will need support.

Also, note that 18% is still a tariff and not zero as ‘free trade’ implies. Moreover, there may be many a slip between the cup and lip.

So what has India given? First, New Delhi’s commitments are consistent with its World Trade Organization obligations. Second, what the US has been offered is not very different from what is being given to the UK and EU, at least in manufacturing. Third, agricultural concessions are politically combustible. The joint statement says India will “eliminate or reduce tariffs on all U.S. industrial goods and a wide range of U.S. food and agricultural products,” listing items like dried distillers’ grains, sorghum for animal feed, tree nuts, fruits, soybean oil, wines and spirits.

It also calls out our non-tariff barriers in food and agriculture. Since we don’t know what a final deal will cover in agriculture, farmer anxiety is real but hopefully manageable with safeguards and transparent communication.

The best response to the deal hence is neither triumphalism nor alarmism. It is conditional optimism.

The most sensitive issue is of energy autonomy and geopolitics. India’s version of the statement does not mirror the claim by US President Donald Trump that India would halt Russian crude imports and buy more from the US (and potentially Venezuela). How to tackle the geopolitical balance between a trade deal and our energy and defence partnership with Russia will test diplomatic skill to the hilt. The best response is not rhetoric but building capabilities.

However, the most consequential upside of the US relationship may not be its 18% tariff. It may be India’s entry into trusted technology and mineral supply chains. A recent piece on ‘Pax Silica’ notes that the US wants coordination among partners to diversify critical mineral supply chains away from over-concentration, especially given China’s dominance of rare earth mining and processing.

This is where India can convert a trade détente into an industrial leap: attract investment in exploration, refining and processing; build downstream capacity; and use ‘trusted partner’ status to plug into high-value global supply chains. But, as the author of the report warns, delivery, regulatory clarity and execution credibility will decide outcomes.

Hence, the practical steps ahead are as follows:

One, treat the tariff edge as an opportunity, not a guarantee. Push export readiness in textiles, footwear, leather goods, home décor and MSME clusters—while investing in compliance capacity for rules of origin and standards.

Two, insist on transparency and guardrails in agriculture. Publish schedules early; use tariff-rate quotas, safeguards and phased openings where needed; pair openings with productivity support for farmers and cold-chain logistics.

Three, build negotiation strength through domestic capability. Strategic autonomy is earned by controlling ‘building blocks’ (electronics, minerals, biopharma, standards, platforms).

Four, plan for the future of work. Even if service exports helped generate a surplus with the US, the AI transition will compress low-end coding arbitrage. The answer is to climb the value ladder—product ownership, applied AI, engineering R&D, domain expertise—so that services stay globally competitive.

A final perspective. The world may be ‘capitulating’ to US pressure, but India’s job is not to win applause, but to secure market access, investment and learning—while keeping domestic legitimacy intact. If we achieve higher exports and deeper tech-industrial capability, we should celebrate the deal.

If it becomes a headline masking lopsided concessions, the market’s euphoria will look like a sugar high. Either way, the decisive factor will not be the 18% tariff. It will be what India builds at home before the next round of talks.

The author is senior fellow with Pune International Centre.