-Ramphal Kataria
Trade under Duress: India–US Tariffs and the Erosion of Strategic Autonomy
Abstract
The trade “deal” announced by US President Donald Trump in February 2026, purportedly resetting tariffs on Indian exports and rebalancing bilateral trade, marks a significant rupture in India’s trade and foreign policy posture. Announced unilaterally by the US President on social media, without a published text or parliamentary scrutiny in India, the agreement follows a year of punitive tariff escalation by the United States linked explicitly to India’s energy purchases from Russia. This article examines the evolution of the India–US trade relationship from its earlier asymmetrical but rules-based structure to a coercive tariff regime and finally to the present opaque “deal”. It argues that the agreement, far from representing a strategic or economic gain for India, reflects negotiated retreat under duress, raises serious concerns about transparency, parliamentary sovereignty and policy autonomy, and risks long-term damage to India’s agriculture, trade diversification and independent foreign policy.
1. Introduction: A Deal Announced Elsewhere
On 2 February 2026, US President Donald Trump announced on his Truth Social platform that he had concluded a “trade deal” with India following a telephone conversation with Prime Minister Narendra Modi. The announcement claimed that US tariffs on Indian goods would be reduced from 50% to 18%, that India would eliminate tariffs and non-tariff barriers on US goods, purchase over $500 billion worth of American products, and cease buying Russian oil. Within hours, US officials echoed these claims, framing the agreement as a major victory for American farmers and energy producers.
What was striking was not merely the content of the announcement, but the venue and process: no joint statement, no released text, no prior parliamentary briefing in India, and a conspicuous divergence between the US narrative and India’s own official statements. While Prime Minister Modi welcomed the reduction in tariffs on Indian goods, he made no reference to Russian oil, zero tariffs on US imports, agriculture or the purported $500 billion import commitment.
This episode invites deeper scrutiny. How did a trade relationship that once operated within multilateral rules descend into tariff warfare? What exactly has changed under the new “deal”? And what does this tell us about India’s evolving trade and foreign policy orientation?
2. The Pre-Crisis Trade Regime: Asymmetry without Coercion
Before the tariff crisis of 2025, India–US trade was characterised by asymmetrical but predictable tariff structures under WTO rules.
According to WTO data, the average applied US tariff on Indian goods was approximately 2–3%, reflecting the low industrial tariffs of advanced economies.1 By contrast, India’s average applied tariff on US goods was significantly higher, around 12–15%, with much steeper protection in agriculture, dairy, livestock products and processed foods.2
This asymmetry was neither accidental nor clandestine. India’s tariff structure reflected its developmental priorities, the vulnerability of its agrarian economy, and long-standing political economy constraints. Crucially, these tariffs were WTO-consistent and applied on a Most Favoured Nation (MFN) basis.
Despite frequent US complaints about market access—particularly regarding dairy, medical devices and digital trade—disputes were pursued through negotiations and, occasionally, WTO mechanisms. The relationship, while unequal, remained rules-based rather than coercive.
3. The Turning Point: Energy, Geopolitics and Tariff Weaponisation
The equilibrium collapsed in 2025. Following the escalation of the Ukraine war and tightening Western sanctions on Russia, India sharply increased imports of discounted Russian crude oil to secure energy affordability and inflation control. By mid-2024, Russia had become one of India’s largest oil suppliers.
The Trump administration explicitly linked trade retaliation to this energy relationship. In early 2025, the US imposed a 25% “reciprocal tariff” on a wide range of Indian exports. Later that year, it added an additional 25% punitive tariff, explicitly framed as a penalty for India’s continued purchase of Russian oil.3
This escalation pushed total tariffs on Indian goods to nearly 50%, rendering large segments of Indian exports—textiles, garments, leather, gems and jewellery—commercially unviable in the US market. The move was unilateral, extraterritorial in intent, and difficult to reconcile with WTO principles.
Reuters reported that the measures affected Indian exports worth tens of billions of dollars and triggered strong protests from New Delhi, which argued that energy security decisions were sovereign and market-based.4
4. India–US Trade Deal 2026: From Asymmetry to Arm-Twisting
Table 1: India–US Trade Regimes Compared
Parameter | Pre-Trade War (till 2024) | US Unilateral Tariff Regime (2025) | Trump-Announced “Deal” (Feb 2026) |
Average US tariff on Indian goods | ~2–3% (WTO MFN rates) | 25% + additional 25% penalty = ~50% | 18% |
Legal basis | WTO-consistent | Unilateral, punitive, non-WTO | Executive announcement; text not public |
Trigger | Normal trade | India buying Russian oil | “Friendship with Modi” (Trump’s words) |
Indian tariff on US goods | ~12–15% average; higher on agri/dairy | Unchanged | Trump claims ZERO tariffs; India denies |
Agriculture & dairy imports from US | Effectively excluded / highly protected | Excluded | US claims entry; India claims exclusion |
Energy commitments | Market-based diversification | Penalised for Russian oil | Trump: stop Russian oil, buy US & Venezuela |
Transparency | Parliamentary oversight | Publicly notified | Announced on Truth Social, not Parliament |
5. India’s Parallel Trade Strategy: Russia and the European Union
While trade tensions with the US intensified, India pursued diversification elsewhere.
5.1 India–Russia Trade
India’s trade engagement with Russia expanded significantly after 2022, anchored primarily in energy. The arrangement involved:
Long-term crude oil supply contracts at discounted rates
Settlement mechanisms outside the US dollar
Increased imports of fertilisers and coal
Prospective cooperation in pharmaceuticals, defence spares and shipping insurance
This trade was not ideological alignment but pragmatic energy economics. The US tariff penalty effectively criminalised this pragmatism.
5.2 India–EU Free Trade Agreement
In January 2026, India and the European Union concluded negotiations on a comprehensive Free Trade Agreement (FTA), described as the most ambitious trade opening India has ever offered.5 The agreement promises:
Progressive elimination or reduction of tariffs on over 90% of traded goods
Significant access for EU automobiles, machinery, chemicals and pharmaceuticals
Expanded access for Indian textiles, leather, marine products and services
EU Deal vs US Deal: The Stark Contrast
US–India “Deal” | |
Negotiated over years | Announced via social media |
Text released | Text absent |
Parliamentary ratification required | Parliament bypassed |
Gradual tariff reduction | Immediate coercive reset |
Reciprocity | One-sided leverage |
Crucially, the EU–India FTA requires ratification by the European Parliament and national parliaments of EU member states, as well as India’s Parliament. Until then, it has no legal force.
This contrast in process is instructive.
6. The February 2026 Announcement: What Was Claimed
On 2 February 2026, President Trump wrote on Truth Social:
“Prime Minister Modi agreed to stop buying Russian Oil, and to buy much more from the United States and, potentially, Venezuela… We agreed to a Trade Deal… lowering tariffs from 25% to 18%. India will reduce their Tariffs and Non Tariff Barriers against the United States, to ZERO… and buy over $500 BILLION DOLLARS of U.S. Energy, Technology, Agricultural, Coal, and many other products.”6
The White House subsequently described the deal as a “major win” for US farmers and exporters, while the US Secretary of Agriculture publicly thanked Trump for opening India’s market to American agricultural products.7
7. India’s Official Response: Precision through Silence
Prime Minister Modi’s public statement was markedly restrained. He confirmed that tariffs on Indian exports to the US would be reduced to 18% and praised President Trump’s leadership, but omitted any reference to:
Russian oil
Zero tariffs on US goods
Agriculture and dairy access
A $500 billion import commitment
Commerce Minister Piyush Goyal later told Parliament that India’s sensitive sectors, including agriculture and dairy, were protected and that energy security decisions would remain market-based.8
The divergence between the two narratives has not been resolved by the release of a signed text or tariff schedule.
8. Import Arithmetic: The Implausibility of $500 Billion
India’s macro-trade data renders the US claim of $500 billion imports deeply questionable.
According to the Union Budget 2026–27 and official trade statistics:
India’s total annual imports are approximately $720–750 billion (about ₹49 lakh crore).9
Imports from the United States in recent years have averaged $45–50 billion annually.
A commitment to import $500 billion worth of US goods would imply:
Nearly two-thirds of India’s total imports sourced from one country
A dramatic displacement of imports from the EU, China, ASEAN, the Gulf and Africa
No timeline or disaggregation has been provided. Without such clarity, the figure appears rhetorical rather than contractual.
9. Tariff Outcomes: Relief Disguised as Concession
The reduction of US tariffs on Indian goods from 50% to 18% has been widely portrayed as a diplomatic success. In reality, it represents:
A partial rollback of punitive measures
Not a restoration of pre-crisis tariff levels
Certainly not a structural gain
At 18%, US tariffs on Indian exports remain six to nine times higher than their pre-2025 levels.
Meanwhile, the claim that India will reduce tariffs on US goods to zero—if realised—would represent a far more radical departure from India’s historical trade policy, particularly if extended to agriculture and dairy.
10. Agriculture: The Silent Fault Line
Agriculture remains the most politically sensitive sector in India. The US has long sought access for:
Dairy products
Poultry
Processed foods
Genetically modified crops
US officials have explicitly framed the deal as a victory for American farmers.7 Indian officials deny any such opening.
Without a published annex or tariff schedule, this contradiction cannot be independently verified. What is clear is that opacity itself becomes a policy risk, especially for a sector already burdened by debt, price volatility and agrarian distress.
11. Trade, Energy and Strategic Autonomy
Perhaps the most troubling aspect of the announcement is its implication for India’s foreign policy.
Trump’s assertion that India agreed to stop buying Russian oil—and instead buy oil from the US and Venezuela—raises fundamental questions:
When did Venezuela, previously sanctioned, become acceptable?
Why is India’s energy policy being announced by a foreign leader?
Can India still claim strategic autonomy if trade sanctions dictate its energy choices?
The use of tariffs to compel foreign policy alignment represents a shift from partnership to discipline.
12. Parliament and the Democratic Deficit
Trade agreements reshape domestic economies and livelihoods. In constitutional democracies, they are subject to scrutiny and debate.
The EU–India FTA awaits ratification. The India–US “deal” was announced while Parliament was in session, without a statement, debate or document. Opposition demands for clarification were met with general assurances, not evidence.
This bypassing of Parliament marks a worrying erosion of democratic oversight in trade and foreign policy.
13. The Butter-and-Bread Analogy (Child Demanding butter, snatched the bread by mom)
India once had:
low US tariffs
policy autonomy
After the trade war:
tariffs were snatched away
autonomy was put on the table
Now, India is being told to celebrate getting back part of what it already had — at the cost of future concessions.
This is not a deal.
It is damage control under duress.
14. Conclusion: Retreat, Not Realignment
The February 2026 India–US trade “deal” does not represent a strategic breakthrough. It represents a negotiated retreat from an artificially created crisis.
India regained partial market access it should never have lost, at the cost of:
Policy ambiguity
Strategic silence
Potential future concessions
For a country aspiring to be a pole in a multipolar world, this episode signals vulnerability rather than confidence. Trade conducted under threat ceases to be trade; it becomes compliance.
Footnotes
1. WTO, World Tariff Profiles, latest edition. ↩
2. WTO, Tariff Analysis Online, India profile. ↩
3. Reuters, “U.S. raises tariffs on Indian goods over Russian oil purchases,” 2025. ↩
4. Reuters, “India protests U.S. tariff penalties linked to Russia trade,” 2025. ↩
5. Financial Times, “EU and India conclude landmark free trade agreement,” January 2026. ↩
6. Reuters, “Trump says U.S. agreed trade deal with India,” 2 February 2026. ↩
7. Reuters, statements by US Secretary of Agriculture, February 2026. ↩ ↩2
8. Reuters, “India says farm sector protected in U.S. trade deal,” February 2026.
9. Union Budget of India 2026–27, Budget Documents, Ministry of Finance. ↩
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