By R. Suryamurthy
India and the United States appear to be racing toward a mid-July deadline to conclude the first tranche of a bilateral trade agreement. Commerce Minister Piyush Goyal has projected confidence, describing negotiations as constructive and suggesting that the proposed arrangement would provide Indian exporters with preferential access to the American market. Washington, too, has struck an optimistic tone. President Donald Trump says a deal will happen. US trade officials describe progress as encouraging. Diplomats speak of a framework that is nearly complete.
Yet behind the diplomatic optimism and carefully choreographed announcements lies a far more complicated question: what exactly is India gaining from a deal that could leave its exporters exposed to the same unilateral tariff actions that prompted these negotiations in the first place?
The closer the agreement moves toward completion, the more important it becomes to distinguish between a trade deal that creates durable economic advantages and one that merely provides temporary political comfort. The distinction matters because trade agreements are not judged by signing ceremonies or diplomatic headlines. They are judged by whether they provide predictability, market access, and long-term commercial certainty. At present, there are legitimate reasons to question whether the proposed interim agreement meets those tests.
The fundamental contradiction at the heart of the negotiations is difficult to ignore. While American negotiators were in New Delhi discussing greater economic cooperation, the United States simultaneously advanced proposals that could impose an additional 12.5 per cent duty on exports from countries including India under Section 301 investigations. That development alone should force policymakers and businesses to ask whether the emerging agreement genuinely reduces trade risk or merely postpones it.
If Washington retains the ability to invoke domestic trade laws to impose new tariffs after signing a bilateral agreement, then the value of any market access concessions secured by India becomes significantly diluted. Preferential access means little if it can be overridden by unilateral action.
This is precisely why several trade experts and former diplomats have expressed reservations. Their concerns are not rooted in opposition to closer India-US economic ties. Rather, they stem from a simple reality: trade agreements are supposed to reduce uncertainty, not institutionalise it.
For Indian exporters, uncertainty has become the defining feature of the current environment. Businesses negotiating contracts extending beyond July remain unsure about the tariff regime that will govern their products. Manufacturing decisions, investment plans, supply chain commitments, and export pricing all depend upon predictable trade conditions. When those conditions remain fluid, economic activity inevitably becomes more cautious.
The irony is striking. India is negotiating a trade agreement primarily to create certainty while the agreement itself may not eliminate the uncertainty generated by America’s evolving trade policies. This challenge becomes even more significant when viewed against the backdrop of broader changes in the global trading system.
The post-Cold War era was built on the assumption that trade liberalisation would become increasingly rules-based and institutionalised through multilateral frameworks. That assumption is rapidly weakening. Across advanced economies, economic nationalism has replaced free-market orthodoxy. Tariffs, industrial subsidies, supply-chain restrictions, and national security considerations are increasingly shaping trade policy.
The United States, under both Republican and Democratic administrations, has steadily moved away from traditional free-trade principles toward a more interventionist approach. The Trump administration’s tariff policies are not an isolated phenomenon; they represent a broader political consensus in Washington that trade must serve strategic objectives rather than purely economic ones.
For India, this creates a dilemma. New Delhi seeks deeper integration with global markets, greater access for its exports, and stronger investment flows from advanced economies. At the same time, it must protect policy flexibility in sectors ranging from agriculture and manufacturing to digital trade and data governance. Striking the right balance requires careful negotiation, particularly when dealing with a partner whose trade policies can shift dramatically depending on domestic political considerations. The danger is that India may end up making permanent concessions in exchange for temporary assurances.
Reports emerging from various stages of the negotiations suggest that India may be expected to lower tariffs, ease market access restrictions, facilitate greater access for American agricultural and industrial products, and align more closely with US preferences on several regulatory issues. While some of these reforms may be economically justified, their value depends entirely on what India receives in return.
A successful trade agreement should create reciprocal benefits. If one side opens its market while the other retains multiple instruments for future trade restrictions, the resulting arrangement becomes asymmetrical.
This concern is particularly relevant because the United States remains India’s largest trading partner and one of its most important export destinations. Indian sectors such as pharmaceuticals, textiles, engineering goods, seafood, chemicals, and information technology services have substantial exposure to the American market. Any future tariff actions could significantly affect their competitiveness. Moreover, India must consider the broader geopolitical implications of the agreement.
There is no doubt that India-US relations have strengthened considerably over the past decade. Strategic cooperation spans defence, technology, critical minerals, semiconductors, energy security, and Indo-Pacific initiatives. Both countries view each other as important partners in a rapidly changing global order. However, trade negotiations cannot be driven solely by geopolitical considerations. Economic agreements must ultimately serve economic interests.
History offers numerous examples of countries accepting commercially disadvantageous trade arrangements because of broader diplomatic objectives, only to discover later that strategic goodwill does not compensate for lost competitiveness. India must avoid that mistake.
The country’s negotiating position today is stronger than many observers acknowledge. India is no longer the vulnerable economy of the early 1990s seeking emergency access to foreign markets. It is the world’s fastest-growing major economy, a critical component of global supply chains, and one of the few large consumer markets capable of driving global growth in an era of slowing demand elsewhere.
With GDP growth estimated at 7.7 per cent, India possesses leverage that previous generations of negotiators lacked. Foreign companies increasingly view India not merely as an export destination but as a strategic production base and investment hub. This reality changes the balance of power in trade negotiations. New Delhi therefore does not need a deal at any cost.
Indeed, one of the most important lessons from international trade diplomacy is that a poorly structured agreement can create more problems than the absence of an agreement. Market access commitments, once granted, are often difficult to reverse. Regulatory concessions can reshape domestic industries for decades. Tariff reductions can alter competitive dynamics in sensitive sectors. These decisions must be evaluated not against immediate diplomatic gains but against their long-term economic consequences.
The central question is not whether India and the United States should sign a trade agreement. The answer to that is clearly yes. The two economies are complementary in many respects and possess enormous untapped trade potential. Bilateral trade could expand substantially over the next decade if supported by a stable framework.
The real question is whether the agreement currently under discussion provides sufficient safeguards against future disruptions. Can Indian exporters be protected from new Section 301 investigations? Can tariff certainty be guaranteed beyond the current political cycle in Washington? Can dispute-resolution mechanisms provide meaningful protection against unilateral actions? Can market access commitments be made genuinely reciprocal? Until those questions are answered, declarations of progress should be treated with caution.
The pressure to conclude negotiations before a politically convenient deadline is understandable. Both governments would like to showcase a successful agreement. Both leaders would welcome a symbolic economic achievement. But trade policy should not be dictated by political calendars.
The world economy is entering a period of heightened volatility characterised by rising protectionism, geopolitical fragmentation, technological rivalry, and growing economic nationalism. In such an environment, countries must prioritise resilience over speed and substance over symbolism.
India’s negotiators face a difficult but crucial task. They must secure an agreement that expands opportunities without compromising strategic autonomy, increases market access without exposing exporters to arbitrary restrictions, and strengthens bilateral ties without sacrificing national economic interests.
A trade deal that merely delays the next tariff dispute would be a diplomatic accomplishment but an economic disappointment. A trade deal that establishes predictable rules, genuine reciprocity, and durable commercial benefits would be something far more valuable: a foundation for the next phase of India-US economic relations. The difference between those two outcomes may determine whether the much-celebrated first tranche becomes a historic breakthrough—or a costly illusion. (IPA Service)
