Reciprocity or Surrender?

On February 3, the former Foreign Secretary of India and currently a nominated member of Parliament, Harsh Vardhan Shringla, lauded the India-US trade deal, which is yet to be signed, calling it the “father of all deals” and expecting bilateral trade to reach USD 500 billion, providing Indian exporters access to a USD 60 trillion market. Participating in the discussion on the Motion of Thanks to the President’s address, Shringla said in the Rajya Sabha that it would help double the trade between the two countries and achieve the goal of USD 500 billion in the next few years. He also mentioned that at present the bilateral trade between India and the US is around USD 212 billion, and he expects it will reach USD 300 billion by the end of this year. He further observed that the 18 per cent tariff, which has been specified for India, is better than “all our international competitors such as Brazil, China, South Africa, Vietnam, Bangladesh, Malaysia, Pakistan, and Indonesia”. Shringla also said the free trade agreement signed between the European Union and India last month, considered the “mother of all trade deals”, along with the India-US trade deal, would provide access to a “USD 60 trillion high-value market” to Indian exporters, reports The Print. Shringla made this statement in the Indian Parliament on the previous day (February 2), US President Trump announced that he would reduce trade tariffs on Indian goods from 50 per cent to 18 per cent after New Delhi agreed to stop buying Russian oil, one of the major sticking points between the two sides.

Meanwhile, United States Trade Representative Jamieson Greer said on Tuesday (February 3, 2026) in an interview with CNBC’s Squawk Box that the US will continue to maintain some level of tariff against India — 18 per cent — “because we have this giant trade deficit with them, but they have also agreed to reduce their tariffs for us on a variety of agricultural products, manufactured goods, chemicals, medical devices, etc. It is an exciting opportunity for both countries.” Mr Greer added that with India right now, on industrial goods, the average tariff is about 13.5 per cent. “That is going to go to zero for virtually everything. When I say virtually, I mean 98–99 per cent. On the agricultural side, there is a vast, vast array of agricultural goods, so it will go to zero,” he said. On non-tariff barriers, he added that getting rid of tariffs is one thing, but often, non-tariff barriers pose problems. “We know American goods are safe, we know they are effective, etc. We have effective regulation in the US, sometimes too effective. So we have an agreement with them on a process for recognising certain US standards. They obviously have their own political considerations, and they have their own processes for accepting those standards, but that is a key portion of this trade agreement that should open up this market of over a billion people to US goods,” Mr Greer said. When asked about Delhi’s Russian oil purchases, Mr Greer said that before 2022–23, India really did not import Russian crude, reports The Hindu. US Agriculture Secretary Brooke Rollins has claimed that the India-US trade deal announced on Monday will result in “export of more American farm products into India’s massive market”.

The deal will also “go a long way” in reducing America’s agricultural trade deficit with India, which, according to her, was valued at USD 1.3 billion in 2024.

Significantly, on Thursday (February 5, 2026), Commerce Minister Piyush Goyal said India and the US will “finalise and sign” a joint statement regarding the first tranche of a Bilateral Trade Agreement in the next four to five days and added that the US reduction of tariffs on India from 50 per cent to 18 per cent will come through an executive order issued by the US President following this joint statement. “We estimate that the formal agreement will be signed in mid-March,” Mr Goyal said.

Since Monday, when Trump made this dramatic announcement, trade analysts have observed two major developments: (i) Before Trump’s reciprocal tariff move, the average US tariff on Indian goods was around 2.5 per cent. Even at an 18 per cent tariff, India has allowed a sevenfold increase in tariff for the protection of the US industry. (ii) Trump’s announcement that India has agreed to eliminate all its tariff and non-tariff barriers on imports from the US, while the stronger and larger economy — the USA — would impose an 18 per cent tariff on India’s imports, reverses the economic logic of special and differential treatment (S&DT) for developing countries. In this case, the developed country is taking advantage of S&DT from a developing economy.

Major concerns

Donald Trump’s claim that India will buy USD 500 billion worth of American energy, agricultural products, coal, and other goods under a newly announced trade deal has raised serious concerns in India, as India’s total annual goods imports from all countries are in the range of USD 700–750 billion. A USD 500-billion commitment to a single country would mean the US capturing a dominant share of India’s import basket, displacing suppliers across energy, agriculture, manufacturing, and minerals. Even if the imports are staggered over five or ten years, such a commitment would still imply the US securing the largest share of India’s total merchandise imports, observes the Business Standard. India is a huge market for China, which it would like to protect. In 2025, India’s imports from China remained substantial, dominated mainly by electronics (mobile components, ICs, laptops, solar cells), machinery (transformers), organic chemicals (antibiotics), plastics, and steel, with total imports potentially reaching over USD 130 billion. Moreover, India has already made trade deals with the European Union, Russia, Great Britain, and a host of other countries. A one-sided mega trade deal with the USA will complicate India’s geo-strategic position.

Farmers have expressed concern about the possible import of crops such as soybean, cotton, maize, and wheat. The Samyukt Kisan Morcha (SKM), an umbrella group of farm outfits, termed the deal a “betrayal of the people”. The SKM reminded Prime Minister Narendra Modi of his statement on August 15, 2025, that “he is personally ready to pay a heavy price to protect the interests of the farmers.” Allowing zero per cent import tariff on US goods is a surrender to the pressure of US imperialism, the SKM said. “This trade deal to allow Indian markets to be flooded by highly subsidised US agricultural products will devastate the entire peasantry in India. The US has only 18.8 lakh farmers as per the recent survey in 2024, compared to 14.65 crore operational holdings in India as per the agricultural census of 2015. 48 per cent of the workforce and 65 per cent of the population in India depend on agriculture and allied sectors,” the SKM said, urging farmers to join the general strike called by the SKM and trade unions on February 12.

US agriculture subsidy

The USA is one of the world’s leaders in grain production, ranked as the largest producer of maize. The USA is also ranked as one of the major exporters of grain, with a wide destination spanning across developed and least developed countries. About 39 per cent of the 2.1 million farms receive subsidies, with the biggest portion going towards maize, soybean, wheat, cotton, and rice. These subsidies are meant to protect producers against fluctuations in prices, revenues, and yield. They subsidise their conservation efforts, insurance coverage, marketing, export sales, research, and other activities. Table 1 provides a brief outline of different agricultural subsidies provided in the USA.

In 2024, the US government provided USD 9.3 billion in subsidy payments to farmers for commodity crops. Subsidies made up 5.9 per cent of total farm earnings that year, with the most funding going to corn, soybeans, and cotton. Commodity crops include corn, soybeans, wheat, cotton, sorghum (a type of grain), rice, peanuts, oats, barley, milk, swine, and calves (specifically, cows). The highest was in 2020, at USD 55.3 billion, primarily due to pandemic-related aid. Since farm subsidies began in 1933, they have contributed an average of 13.5 per cent of net farm income nationwide. In 2024, subsidies totalled 5.9 per cent of farm income, 7.6 percentage points lower than the 91-year average.

Corn was the most-subsidised crop in 2024; corn farms received USD 3.2 billion, or 30.5 per cent of all federal farm subsidies. Corn makes up 95 per cent of all US-produced feed grains (a category that also includes oats, barley, and sorghum). It is used for livestock feed, ethanol production, and food in products like sweeteners, corn oil, beverages, starch, and alcohol. Soybeans came in second with USD 1.9 billion, or 17.9 per cent of all subsidies. Table 2 lists the top 10 US agricultural commodities receiving subsidies in 2024.

Indian agricultural subsidies are financial aids provided by the government to farmers to reduce input costs (fertilisers, power, and seeds) and ensure price stability through the minimum support price (MSP). However, these subsidies must be within 10 per cent of the production value of the crop, and the WTO (World Trade Organisation) must be notified about this support annually.

It may be recalled that in 2018, the United States complained to the World Trade Organisation that India provided domestic support to rice and wheat that was 60–70 per cent higher than the “de minimis” level of 10 per cent stipulated by the World Trade Organisation. Ironically, the international prices that need to be considered for the calculation of the Aggregate Measurement of Support (AMS) for developing countries like India were fixed using the base year 1986–88. India argued that the reasoning of the USA — that India had exceeded domestic support by a large amount — was flawed, as it should have considered the inflation effects on prices as provided by Article 18.4 of the Agreement on Agriculture (AoA). Article 18.4 of the agreement provides that WTO members should give due credit to inflation and its influence on the ability of other member states to comply with domestic support commitments.

Developed economies like the USA and the EU have weaponised agricultural subsidies to gain market access in developing countries for the benefit of their farmers. Indian cultivators have reason to fear that US farm products, if allowed unrestrained market access in India, will devastate the livelihood of millions of small and marginal farmers. In addition to subsidised dumping of grains, there is a possibility of export of unsafe genetically modified US corn to the vast Indian market.

The proposed India-US deal, if finalised, will be a remarkable case in the history of global trade deals where a developing country is compelled to accept zero tariffs and nil non-tariff barriers for imports originating from the world’s strongest economy.