New Delhi and Washington have reached a trade agreement that slashes U.S. Tariffs on Indian goods to 18% from 50%, according to reports. The deal, finalized amid celebrations, is predicated on India potentially scaling back its purchases of Russian oil and lowering broader trade barriers. While details remain limited, the agreement signals a reset in fractured ties between the two nations, particularly after a period of strained economic relations.
Limited Access for U.S. Agriculture
Despite the broad outlines of the deal, access for U.S. Agricultural products to the Indian market appears limited. India is unlikely to significantly lower tariffs on key U.S. Farm exports like corn, soybeans and soymeal, prioritizing the protection of its millions of small farmers. This reluctance stems from India’s ban on genetically modified (GM) food crops, as the United States primarily produces GM varieties of these commodities. The scale of India’s import needs for these crops is also relatively small compared to countries like China.
India currently holds substantial stockpiles of both corn and soymeal, further reducing the incentive to increase imports. While the nation is the world’s largest importer of soyoil, sourcing primarily from Brazil, Argentina, and the U.S., its purchases of soybeans themselves remain negligible, even from African nations that produce non-GM oilseeds. Domestically, India also possesses ample supplies of ethanol, produced from corn, rice, and sugarcane, diminishing the likelihood of conceding to requests for ethanol or corn feedstock imports.
Dairy Sector Remains Protected
The U.S. Has also sought greater access to India’s dairy market, which has historically been shielded by high import duties and non-tariff barriers. However, New Delhi is expected to keep this sector off the table, recognizing its critical importance to the livelihoods of Indian farmers. The average Indian farm operates on a significantly smaller scale – just two to three animals per farmer – compared to the hundreds common in the United States, a disparity that Indian officials argue would disadvantage their growers.
Potential Areas for Concession
Despite the resistance in key agricultural areas, India could potentially agree to lower tariffs or expand import quotas on premium farm products such as almonds, walnuts, pistachios, apples, pears, and berries. Trade barriers for fruits, vegetables, wine, and spirits – products less likely to harm Indian farmers – could also be reduced. Given India’s existing import dependence on these premium fruits and nuts, lowering barriers would likely be politically palatable for Prime Minister Narendra Modi’s government.
Such concessions would allow President Trump’s administration to tout increased access to Indian markets as a win for American farmers. The deal, appears to be structured to minimize disruption to the Indian agricultural sector while offering symbolic gains for the U.S.
The Importance of India’s Farm Sector
Although the agricultural sector contributes a modest 15% to India’s nearly $4 trillion economy, it remains the primary source of livelihood for nearly half of the country’s 1.4 billion people. The vast majority – approximately 80% – of Indian farmers are smallholders, cultivating two hectares of land or less, resulting in limited incomes. Farmers represent a powerful voting bloc, and successive governments have been cautious about implementing policies that could alienate them.
The Samyukt Kisan Morcha, an umbrella organization of farmers’ groups, and its leaders, including Rakesh Tikait, have already voiced criticism of the trade deal with Washington, highlighting the political sensitivity surrounding agricultural trade liberalization.
Russian Oil and Broader Implications
A key component of the agreement appears to be India’s potential willingness to scale back its purchases of Russian oil following the tariff relief. , sources indicate that New Delhi may adjust its oil sourcing strategy in response to the trade concessions. This shift could have broader implications for global energy markets and geopolitical alignments, potentially reducing Russia’s revenue streams and strengthening the U.S.’s influence in the region.
The India-U.S. Trade deal represents a significant development in the economic relationship between the two countries. While the agricultural component appears constrained by domestic political considerations, the agreement’s potential impact on energy markets and the broader geopolitical landscape warrants close attention. The long-term effects of the deal will depend on the specific details of implementation and India’s commitment to reducing its reliance on Russian oil.
