US President Donald Trump did not like American merchandise trade deficits. The US had major trade deficit with India as well (imports $87.3 billion, exports $41.5 billion, and trade deficit $45.8 billion in 2024). Trump, however, loves weaponising trade tariffs.
Brandishing his tariffs as a sledgehammer, he coerced many countries into highly unfair trade deals. India held out for long but gave in weeks before his reciprocal tariffs were declared unconstitutional by US Supreme Court on 20 February.
India’s interim trade deal with Trump also stands sabotaged. The 18 percent reciprocal tariffs, which he pushed India to agree to in addition to a host of concessions, no longer hold.
A chastised Trump has resorted to another illegality. Using powers under Section 122 of the Trade Act,1974, which allows a President to impose temporary import surcharges of up to 15 percent ad valorem to address ‘fundamental international payments problems’, primarily large and serious balance of payments deficits, Trump has imposed 15 percent tariff on all the goods which were subject to reciprocal tariffs earlier.
A merchandise trade deficit, which the US has been running for decades, is not an international payments problem and cannot be solved by temporary import charges. This move will also be challenged and may eventually be declared unlawful.
Till then, however, India, like many other countries, is faced with 15 percent additional tariffs, at least for the next five months, or additional tariffs levied on some other pretext/law either during this period or after five months. Not doing a trade deal with Trump is therefore not a good option.
Agriculture trade is pivotal to the trade deal with US. Can India complete the unfinished interim trade agreement with Trump? Did India get a good bargain on agriculture in the interim agreement? Can trade access and India’s non-tariff barriers still prove to be spoilers of a final deal? Can India get a great deal by strategically negotiating concessions on agricultural products?
Agriculture: The Real Deal-Breaker
Trump’s demands included a wholesale opening up of all agricultural products like dairy, genetically modified (GM) soybeans, corn and poultry etc, which India had jealously over-protected for decades using high tariffs and unprecedented non-tariff barriers.
Even when faced with the prospect of losing the lucrative US market, India refused to buzz. Indian political leadership, on the contrary, went into an overdrive committing to ‘protect farmers’ interest’, without, however, ever explaining how such excessive protection served Indian farmers’ interest.
The three-month deadline passed and India could not get a deal despite invoking the strength of PM Narendra Modi’s friendship with President Trump time and again.
On 31 July 2025, Trump slapped India with 25 percent reciprocal tariffs on all Indian exports, except those which Americans really needed like smartphones and pharmaceuticals. All agricultural and labour-intensive products of India—about 50 percent of India’s total exports to US, including textiles, leather, fisheries, gems and jewellery—began suffering a 25 percent reciprocal tariff.
Trump wielded another sledgehammer on 6 August 2025. Citing India’s imports of Russian oil propping up Putin’s war with Ukraine, Trump imposed an additional 25 percent tariff on India’s exports already subject to 25 percent reciprocal tariffs, raising it to 50 percent—the highest tariffs in the world.
Yet, for months, India held out, citing its need to protect its agricultural and farmers’ interests. Permitting imports of American agricultural products at zero duty and without any non-tariff barriers had become the real deal-breaker.
India Relents
Suddenly, India’ bravado gave way on 2 February 2026. Citing PM Modi’s agreement ‘to stop buying Russian oil’, Trump dropped 25 percent punitive tariffs.
As India also ‘agreed to a Trade Deal’ and ‘move forward to reduce their Tariffs and Non-Tariff Barriers’ to ‘Zero’ and committed to buying over ‘$500 BILLION Dollars of US energy, technology, agricultural, coal, and many other products’, Trump condescended to reduce reciprocal tariffs from 25 percent to 18 percent.
India made considerable concessions on agricultural products to get 7 percent reduction on reciprocal tariffs, although the interim agreement, which Trump released as joint statement, was not to become effective until a formal trade deal was signed. The formal trade deal remained under negotiation and is still under negotiation despite the US Supreme Court declaring reciprocal tariffs—the whole basis of the interim agreement with India—illegal.
Was the Interim Deal a Bad Bargain?
As per the United States–India Joint Statement of 6 February 2026 on the interim agreement, India agreed to ‘eliminate or reduce tariffs on all US industrial goods and a wide range of US food and agricultural products’, including ‘dried distillers’ grains’, red sorghum for animal feed, fresh and processed fruit, soybean oil, wine and spirits, and ‘additional products’.
There was no specific exclusion for GM soybean oil (which can be normally considered as included in soybean oil), and ‘additional products’ could very well cover corn, dairy, and poultry products.
In addition, as stated in other paragraphs of the joint statement, India agreed to ‘address long-standing non-tariff barriers to the trade in US food and agricultural products.'
While the text was being negotiated, it appeared that India had agreed to remove non-tariff barriers on most of agricultural products including GM soyabean oil, chicken legs, and dairy products etc.
What did India get in return? India really ended up doing a very poor bargain. A small 7 percent reduction in reciprocal tariffs from the most unfairly and illegally imposed 25 percent reciprocal tariffs, which on 2 February definitely appeared to be on their way out as the Supreme Court was about to release their judgement any day!
Could India have done better?
Bangladesh could wrangle zero reciprocal tariffs on textile exports by promising to import American cotton, which it in any case imports and needs to import to expand its US market.
That India had a bad agricultural deal was evident from the statements of Commerce Minister Piyush Goyal, who first unsuccessfully tried to assure that India had not conceded much and later that India would also get zero duty on its textile exports on the lines of Bangladesh.
Can India do better now?
The Politics of ‘Protecting Farmers’
There were no real farmers’ interests involved at any stage of the year-long negotiation drama with President Trump.
India is woefully short in edible oilseed production and imports a lot of edible oils. Indians abroad—and everyone elsewhere—consume GM soybean and GM cottonseed oil without any demonstrated or documented adverse health effects. Farmers stand to lose nothing if US soybean oil is allowed to be imported at zero duty and without non-tariff restrictions.
The same is true of dairy products. All talk of American cows eating non-vegetarian feed and traces of that getting passed on into milk and, in turn, into American cheese and other dairy products, is hogwash. More than 80 percent of India’s population is non-vegetarian in any case. American dairy products would not be able to compete with Indian dairy products. Invoking farmers’ interests in this respect is a false cry.
Corn and cotton imports are non-issues as well.
Indian industry imports American cotton in any case. In most years, international cotton prices are higher than Indian prices, resulting in Indian farmers exporting a lot of cotton. In some years, when they are lower, the Cotton Corporation of India (CCI) can buy Indian cotton at MSP, as it usually does.
If American corn, hauled across the seas, can give price competition to Indian maize, Indian farmers need not produce corn or maize at all. Moreover, if industry can produce ethanol at rates cheaper than petroleum product imports using American corn, it makes considerable sense to do so.
The hollowness of India’s rhetoric of ‘protecting farmers’ interests’ has been quite exposed after the Interim Agreement with the US. There have hardly been any protests—except from ill-informed political parties—from farmers even after it became clear that India had indeed agreed to liberalise access for American agricultural products and remove non-tariff barriers.
How India Can Still Secure a Better Deal
India needs to get its labour-intensive products, as specifically mentioned in the interim agreement—textiles and apparel, leather and footwear, plastics and rubber, organic chemicals, home décor, artisanal products and certain machinery—exported to the US without any reciprocal tariffs, Section 122 tariffs, or tariffs imposed under any other excuse. India also needs access to the American market for all the remaining exports which did not attract 50 percent or 25 percent reciprocal tariffs (15 percent now).
The whole episode also made it clear that President Trump’s tariff weaponisation strategy can be neutralised if Trump is made to be seen serving US farmers’ interests and/or to eliminate US trade deficit.
While eliminating a trade deficit is a meaningless strategy in this integrated and interdependent world, this Trump demand was well served by India committing to import $500 billion worth of US goods—aircraft, energy, defence and other products. This ‘intention’ or ‘promise’ or ‘assurance’ can be maintained.
India can exploit Trump’s weakness for appearing to serve American farmers’ interests by liberally agreeing to grant import duty concessions on agricultural products and by specifically agreeing to remove almost all non-tariff barriers, in return for two important concessions (or payments, as termed in international trade negotiations).
First, Trump must allow all Indian exports currently subject to 15 percent tariffs to be imported into the US at zero additional reciprocal, Section 122 or other contrived import duties. This is an absolutely fair and minimum ask for India to allow zero-duty full access to all American agricultural exports.
Second, Trump must be asked to roll back extra visa fees levied and other restrictions imposed on Indian students and immigrants to the US. He must also commit not to take any measures to impose restrictions on India’s IT and other services exports to the US.
Such a deal would serve India’s real interests well. This is the moment to strike it.
(Subhash Chandra Garg is the Chief Policy Advisor, SUBHANJALI, and Former Finance and Economic Affairs Secretary, Government of India. He's the author of many books, including 'The $10 Trillion Dream Dented, 'We Also Make Policy', and 'Explanation and Commentary on Budget 2025-26'. This is an opinion piece, and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)