Geo-economics: Why India’s interim trade deal with the US matters more than its tariff math

In today’s context, mutually lowered market barriers signal that India and the US are moving closer, not apart.

Last year’s storm of geopolitics, seen in Trump’s selective targeting of India with an add-on 25% punitive tariff for buying oil from Russia while ignoring the imports of China, Turkey, Japan, Hungary, et al, has finally blown over.

This matters for business, finance and our broad economic prospects, not just for trade. The global chessboard of diplomacy has shifted in our favour: the Quad will not be scuppered and China cannot hope to tighten screws on India, nor expect to gang up with Pakistan against an India left to fend entirely for itself. Critics who accuse the government of having sold the country short fail to take a global view.

An 18% US tariff counts as preferential market access and we need not compare it with India’s zero-duty list for this deal to spell net positive results for us; this game defies such easy math. Sure, some local manufacturers are likely to sweat under the pressure of eased imports, but our output must get cost competitive in any case, especially with this sector being reshaped globally by technology. Our long aim, after all, is to snap into global value chains.

Talks on taking this framework to its final stage before US tariffs are fully lifted on key Indian exports should place that goal above the nitty-gritty of give-and-take for home optics.

In the farm sector, on balance, both sides have done well on batting for domestic interests; keeping genetically modified foodstuff out, for example, is our sovereign right, though we cannot pretend some Indian growers have no cause to feel let down.

A broad weigh-up of tariffs under this pact’s outline reveals a fair degree of consistency with what we have offered other rich-world trade partners—like the EU—keen on easier access to our markets.

As we work towards a sealed deal with the US, we must stay wary of any Trump flip, given how hard it is to bet on the stability of his stance. Yes, America’s oil-tariff relief is conditional, but with geopolitical trade-offs a hard reality, strategic autonomy must go by what optimizes our interests.

New Delhi’s commitment to buy $500 billion worth of stuff from the US across a range of sectors over the next five years is not unrealistic if we keep energy imports fungible. Indian airlines already have aircraft orders worth $77 billion waiting to be fulfilled and aviation is headed higher; plus, the interim deal envisions a role for India in aerospace value chains. No less notably, the defence aspect of the larger India-US compact being worked upon is likely to involve imports of American weaponry.

In itself, a trade deal is just an opportunity. The challenge comes now: We must adapt to a world that might change at warp speed. Artificial intelligence (AI) could upturn manufacturing, services and even agriculture.

To the extent trade deals foster the economy’s globalization, our economic agents must ascend a curve led by the globe’s best, but without letting AI-rich tech imports blunt a labour or human-resource edge they may need to wield. Today’s wave of export optimism should set minds whirring on how to make the most of this deal.