The facts — and frictions — of the U.S.-India trade deal

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The big story

“Easier said than done,” is a phrase I have now heard several times from various experts when we discuss the feasibility of the terms of a US-India trade deal.

Less than a week after the signing of the trade agreement between India and the European Union It’s finishedUS President Donald Trump announced on Monday mail On Social Fact he agreed to a deal with Indian Prime Minister Narendra Modi, calling him a “great friend”.

Trump said that Washington would reduce tariffs on Indian goods to 18% from 50%While New Delhi intends to reduce customs duties on American goods to zero, replace Russian oil with supplies from the United States and Venezuela, open sensitive markets such as agriculture, and purchase $500 billion worth of American goods.

Modi in his country answer On [global] peace.”

Despite the outpouring of warm feelings on both sides, the agreement is in danger of being derailed. What the two leaders said — and what they didn’t say — is already causing confusion.

“US President Trump’s claims that India will reduce tariffs to zero, stop importing Russian oil, and raise US imports to US$500 billion have not yet been confirmed by Indian authorities,” said Alexandra Herrmann, chief economist at Oxford Economics.

“It seems unrealistic to us, which in turn increases the risk of US decline“,” She added.

This would not be the first time Trump has backed away from a trade agreement.

Last month, Trump raised tariffs on South Korean imports again 25% from 15%Pointing out the delay in the South Korean Legislative Council in approving the agreed-upon trade agreement.

The India-US trade deal represents a major achievement, but “no deal is confirmed,” Nomura said in a report on Tuesday, citing Trump’s renewed threat to raise tariffs on South Korea.

Disputed sector

India’s first official deviation from Trump’s proposed trade terms came on Tuesday, with New Delhi’s Commerce and Industry Minister Piyush Goyal saying the deal would go ahead. protects “The interest of our agriculture and dairy sectors is fully respected.”

However, his counterparts in Washington are emphasizing Trump’s claim that India will remove non-tariff barriers to its US agricultural market and remove tariffs on the majority of agricultural imports.

India will reduce tariffs to zero on a “large” range of agricultural goods, US Trade Representative Jamison Greer said on Wednesday, adding that there would be some protectionism around a few specific key areas.

“For a variety of things like nuts, wine, spirits, fruits and vegetables, tariffs will drop to zero,” Greer said. He said Squawk Box on CNBC. “It’s a big win.”

The domestic agriculture sector is important to both the US and Indian administrations.

In December last year, the Trump administration distributed a $12 billion aid package to support farmers facing financial problems. Ordeal Due to the trade war between the United States and its major economic partners.

Washington needs new markets, such as trade relations with the second and fifth largest agricultural Export markets, Canada and the European Union, respectively, have deteriorated. The US President even threatened Canada with 100% tariffs if it did so Signs Trade agreement with China. His plans to annex Greenland also led to… tension For relations between the European Union and the United States

As for India, agriculture is the main source Livelihood For about 42% of India’s population of 1.4 billion people – it is therefore a politically sensitive issue. The Modi government’s last attempt to introduce agricultural reforms ended in failure in 2021, Facing Vigorous protests from the country’s agricultural lobby.

India is likely to remain cautious about across-the-board tariff cuts in “politically sensitive areas such as agriculture” where domestic considerations remain “strong,” said Rima Bhattacharya, head of Asian risk insight, corporate risk and sustainability at a Singapore-based consultancy. Verisk Maplecroft.

This year, three major elections are scheduled in the states of West Bengal, Tamil Nadu and Kerala, all of which are ruled by opposition political parties and have strong farm lobbies.

The Indian government has had few details about the trade deal and is facing questions from opposition political parties. Indian opposition leader Rahul Gandhi did just that accused Modi was “compromised” and “surrendered to tariffs.”

“Without adequate adjustment measures, the increase in low-priced food imports could displace some domestic products, weaken incentives for domestic value addition, and weaken parts of the fast-moving consumer goods ecosystem,” said Nitin Bhasin, head of institutional equities at Indian brokerage and research firm Ambit.

Disagreement over energy security

It also raises questions about the feasibility of Washington asking India to completely stop its purchases of Russian oil and replace it with American or Venezuelan oil.

Experts said that if India stops buying Russian crude entirely, this will harm the long-term relationship between New Delhi and Moscow.

“New Delhi will not sever its strategically important relationship with Moscow,” said Shitij Bajpai, senior research fellow for South Asia at Chatham House.

On Wednesday, the Indian Commerce Minister repeat The country’s position is that energy security is a top priority for the government. He added that decisions regarding energy purchases were made on the basis of the market and “evolving international dynamics.”

Despite US sanctions on Russian oil companies and Washington’s repeated claims about India halting Russian oil imports, data from consultancy Rystad Energy shows that Russia remains the largest supplier of crude oil to New Delhi with 1.06 million barrels per day shipped in January.

The Kremlin has He insisted New Delhi did not issue “any statements” regarding stopping supplies from Russia.

India is a price-sensitive buyer in global oil trade, said Avani Bhatnagar, senior oil markets analyst at Rystad Energy., Adding, “India’s shift away from Russian crude is likely to increase purchasing costs.”

Experts say that Russian crude is currently cheaper than its counterparts due to US sanctions, and replacing it with American crude will not be economical due to high shipping costs.

Data from commodity information firm Kpler shows that Russia’s Urals crude is currently trading at a discount of $11 per barrel to US Brent crude. Middle Eastern crudes cost up to $9 per barrel more than Russian oil.

“Russian crude is much cheaper,” said Moyu Xu, senior oil analyst at Kpler, adding that halting purchases will pressure the refining margins of Indian state-owned companies such as Indian Oil Corporation and Bharat Petroleum Corporation.

With strategic and economic interests at risk, India is unlikely to stop imports of Russian crude oil, according to experts. However, this is a key demand from Washington, so this could be another point of friction in the trade deal.

“The energy trade-off for India is likely to be a worse import bill and current account pressures at a time when capital outflow pressures from India persist,” said Louise Lu, head of Asian economics at Oxford Economics.

American purchase

What is adding to the pressure on India’s import bill is the commitment to buy more American goods.

General merchandise in India Imported Its value reached $720.24 billion in fiscal year 2025, with a trade deficit of $94.3 billion. This includes merchandise He deserves $45.3 billion from the United States

Now, the US administration wants India to buy half a trillion worth of US defense, transportation, energy and agricultural goods. Even if the pace varies, experts believe that it will be difficult to achieve this number.

Evan A. said: “Analysts would be wise to ignore some of the numbers in the agreement, or at least treat them as ambitious numbers,” said Feigenbaum, vice president for studies at the Carnegie Endowment for International Peace. in condition Tuesday.

Indian Commerce Minister has Hint New Delhi could increase its imports from the United States in sectors such as energy, nuclear power, data centers and aviation, but did not share many details.

Chatham House’s Bajpai said India could buy products from those sectors, but “reaching the $500 billion target is a long way off.”

Neither side has announced a clear date for the official announcement of the deal, but Indian Goyal said that a joint statement will be issued soon.

Meanwhile, Bhattacharya, of risk management firm Verisk, suggests investors should view “major undertakings as open positions rather than stable outcomes.” As negotiators work out the details, she said there may be room for “renewed friction.”

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