India-US trade deal brings relief—with strings attached

Subscribe to enjoy similar stories. India has struck another trade deal—this week with the US. Call it a deal with President Donald Trump if you like, but the bottom line is this: In the space of a fortnight, New Delhi has sealed two free trade agreements (FTAs), with the US pact, for all practical purposes, an interim one.

And there are linkages between the two FTAs. For one, India-European Union (EU) FTA appears to have provided the momentum for the US to announce a deal with a country Trump once derided as a “dead economy". By now, everyone knows that the India-US deal was actually sitting on Trump’s table for many weeks when India and the EU clinched the “mother of all deals".

Perhaps it was the optics that finally nudged things along—the image of Prime Minister Narendra Modi flanked by European Commission President Ursula von der Leyen and European Council President Antonio Costa, all smiles, hands raised, and fingers interlocked in triumph. On a more serious note, what the India–EU deal did was create some much-needed manoeuvring room for New Delhi. The agreement could never have been an antidote to the absence of a US deal—these are fundamentally different markets, and India trades meaningfully with both.

One was never a substitute for the other. But the pact did serve as a morale booster. It may also have stung Trump, giving him the sense that someone else—Europe, in this case—had stolen the moment by being first to announce a deal with the world’s fifth-largest economy.

The agreement with the US, however, is welcome. It cuts India’s tariff burden from 50% to 18%. Of the earlier levy, 25% was imposed over what the US called India’s “unfair trade" surplus, while the remaining 25% was linked to India’s purchase of