The recalibration of US tariffs on Indian exports to an effective rate of 18 per cent has been greeted, particularly in financial markets, as evidence of a diplomatic thaw. That reading is incomplete. What has occurred is not a trade agreement in the classical sense, but a rebalancing of pressure, shaped by political incentives on both sides and constrained by unresolved structural differences.
The earlier tariff burden — which had approached 50 per cent — was never a sustainable equilibrium. It combined a reciprocal trade measure with an explicitly political penalty linked to India’s energy relationship with Russia. The result was a distortion that hurt Indian exporters without delivering corresponding policy concessions from New Delhi. Its partial removal reflects exhaustion with a blunt instrument rather than a convergence of interests.
At 18 per cent, India regains competitiveness relative to its principal export rivals in the US market — notably China, Bangladesh, and Pakistan. This matters economically. Indian exports to the United States are concentrated in price-sensitive sectors where marginal tariff differences determine sourcing decisions. The market response, therefore, reflects a reassessment of earnings and volumes rather than confidence in long-term policy alignment.
Yet the tariff level itself remains elevated by the standards applied to US treaty partners. It signals accommodation without normalisation. From Washington’s perspective, this preserves leverage. Tariffs are no longer punitive, but they remain adjustable, offering scope for future escalation should negotiations stall or political priorities shift.
Public messaging around the adjustment underscores this asymmetry. Prime Minister Narendra Modi emphasised personal diplomacy and continuity, framing the development as a product of dialogue rather than concession. The language was symbolic, carefully avoiding specificity. By contrast, statements attributed to Donald Trump were expansive, presenting the tariff change as part of a broader package of Indian commitments on energy imports, market access, and strategic alignment.
Those claims do not withstand basic scrutiny. India’s fiscal capacity, trade volumes, and energy requirements render figures such as $500 billion in US imports implausible within any reasonable timeframe. More importantly, India has made no formal declaration of abandoning Russian oil, which continues to account for a substantial share of its crude imports. The absence of confirmation suggests that these assertions function primarily as political signalling, aimed at domestic audiences rather than counterparties.
What is notable is not what has been agreed, but what remains deliberately unspecified. No legal text, sectoral schedules, or enforcement mechanisms have been released. This ambiguity is not accidental. It allows New Delhi to claim economic relief without surrendering strategic autonomy, while enabling Washington to present firmness without locking itself into a rigid framework.
This episode illustrates a broader shift in global trade diplomacy. Agreements are increasingly provisional, fragmented, and mediated through announcements rather than institutions. Tariffs are adjusted incrementally, not dismantled; commitments are implied, not codified. The result is a system in which uncertainty becomes a feature, not a flaw.
For India, the immediate gains are real but bounded. Exporters benefit, markets respond, and diplomatic temperature cools. For the United States, the adjustment restores influence without relinquishing control. Neither side has resolved the underlying questions of market access, industrial policy, or strategic alignment.
The durability of this reset will therefore depend less on rhetoric than on documentation. Until binding terms replace political declarations, the tariff shift should be understood as a tactical pause — a moment of recalibration in a relationship that remains defined by negotiation rather than settlement.
