The Wall India Built Around Itself
India charged over 100% tariff on imported cars. On almonds and walnuts, it went as high as 120%. On agricultural goods as a whole, the average tariff stood at 39%, according to the White House fact sheet released alongside the interim trade framework. The US average on those same goods was 5%.
India's tariffs were the tariffs of a country hiding from competition.
For decades, India's domestic political economy made those walls impossible to tear down. Farmers voted. Industrialists lobbied, and every liberalization attempt stalled at the gates of coalition politics. The bold reforms that India needed kept getting postponed.
Then Trump showed up with a sledgehammer.
How Bad It Got Before the Deal
The US ran a goods trade deficit of roughly $45.7 billion with India, according to ClearTax analysis of US trade data. That number had been rising.
In June 2019, the US terminated India's participation in the Generalized System of Preferences - a program that had allowed Indian goods worth $6.3 billion to enter the US duty-free, according to the US Trade Representative. The stated reason: India had failed to provide assurances of fair market access. India retaliated with higher tariffs on American almonds, apples, and lentils. Nothing changed fundamentally.
That was the dress rehearsal. The main event came later.
By mid-, total US tariffs on Indian goods had reached 50%. One 25% layer was the so-called reciprocal tariff. The second 25% layer was punishment for India's continued purchase of Russian oil, according to CNBC. Goldman Sachs estimated the tariffs could drag annual GDP growth down by 0.3 percentage points. Indian equity markets saw $19 billion in portfolio outflows from foreign investors, according to Goldman Sachs Research.
The Institute for Chinese Economic Research warned that tariffs threatened up to 70% of India's exports to the US. The situation had become, as analyst Michael Kugelman described it, the worst crisis in two decades of the US-India relationship.
What Has Already Been Tried
India's history of trade reform is a history of doing just enough to avoid a full crisis, then stopping.
The biggest reform moment was 1991. India was nearly bankrupt. Foreign exchange reserves had fallen so low that India had to physically ship 47 tonnes of gold to the Bank of England as collateral for emergency loans, according to Wikipedia's account of the 1991 crisis. The IMF demanded sweeping economic reforms in exchange for financial support. Peak tariffs fell from 355% toward 50% over the following years. GDP per capita grew at roughly 6% annually through the 1990s. The liberalization worked - but it only happened because India had no choice.
That is the lesson. As former ambassador Mohan Kumar said at a panel discussion at Dr Ambedkar International Center in Delhi: "We reform under compulsion."
In 2019, the GSP revocation was a smaller compulsion. India chose not to use it. The same disputes over medical devices, e-commerce, and agricultural access that triggered the GSP revocation were still unresolved when the second Trump term arrived with far larger tariffs.
The Interim Framework India Negotiated
The joint statement released on February 7 by India and the US announced a framework for an interim agreement on reciprocal and mutually beneficial trade, per the official White House document.
The headline number: US reciprocal tariffs on Indian goods dropped from 25% to 18%, per the joint statement. A separate 25% penalty for Russian oil purchases was removed entirely after India agreed to shift its energy sourcing. That brought total tariffs from 50% back to 18% for covered goods.
Goldman Sachs immediately upgraded India's GDP growth forecast for the current calendar year by 0.2 percentage points to 6.9%, citing the lower tariff environment. The firm also lowered its estimate of India's current account deficit by 0.25% of GDP.
On India's side of the ledger, India agreed to eliminate or reduce tariffs on all US industrial goods and a wide range of food and agricultural products. This includes dried distillers' grains, red sorghum, soybean oil, tree nuts, fresh and processed fruits, wine, and spirits, per the joint statement. India also committed to address longstanding non-tariff barriers on medical devices and communications equipment, and to negotiate bilateral digital trade rules.
Commerce Minister Piyush Goyal announced that the agreement safeguards "sensitive agricultural and dairy products" including wheat, rice, maize, milk, ghee, onion, potato, and pulses. Goyal called the agreement an opening of a $30 trillion market to Indian exporters.
SBI Research estimated that the deal could generate at least $45 billion in additional annual trade surplus for India - equivalent to about 1.1% of GDP. The same analysis projected $3 billion in foreign exchange reserve savings.
The Disputes That Remain
Not everything is settled. The Delhi-based Global Trade Research Initiative called the deal an "uneven exchange" - arguing that India reduced tariffs on all industrial goods while the US only reduced its reciprocal tariff on roughly 55% of Indian exports. The Section 232 tariffs on steel, aluminum, and copper remain in place on several Indian categories.
The agreement's durability is tied to geopolitics. If India resumes Russian oil purchases at scale, the executive order allows the US to reimpose the 25% penalty tariff, per Clark Hill analysis of the deal structure. India's Russian crude imports had already fallen before the deal was finalized - partly from Washington's pressure, partly from shifting global oil dynamics.
The $500 billion purchase commitment India agreed to - covering energy, aircraft, precious metals, technology, and coking coal over five years - drew scrutiny. The Global Trade Research Initiative noted this would require India's imports from the US to more than double from current levels annually. Goyal called the target "extremely conservative" given Boeing aircraft orders and expanding energy ties.
Farmer groups have raised concerns about the agricultural concessions. The Samyukt Kisan Morcha - the same union that led the large farm protests of 2020-21 - announced nationwide protests after the deal framework was released. Their concern: that soybean oil imports could undermine farmers in Madhya Pradesh, Maharashtra, and Rajasthan. The government's position, backed by the text of the agreement, is that the most sensitive staples remain fully protected.
The Political Barrier
The political economy that built the tariff wall keeps rebuilding it.
India's average applied tariff rate of 17% - among the highest of any major economy - did not arise by accident. It arose because every import-competing industry in India has a domestic constituency. Automakers lobbied successfully for protection. Toy manufacturers did the same, and so did electronics assemblers. The License Raj is gone but the Tariff Raj lives on.
Ambassador Mohan Kumar's framing is the most honest description of where India stands: Trump's tariff shock is a "perfect crisis" - similar in structure to 1991 - that gives Indian policymakers permission to do what they always knew needed doing but could never politically justify. Professor Manish Dabhade, founder of The Indian Futurs think tank, offered a different frame: that India's reforms today arrive not in one dramatic burst, but as "cumulative, often quiet shifts" driven by technological disruption and geo-economic fragmentation. Both are right.
How Other Countries Fixed This - South Korea
South Korea was, for decades, considered a protectionist country. The Center for Strategic and International Studies described it as a market "kept closed through high tariffs and pervasive and opaque non-tariff measures."
By the mid-2000s, Korean officials faced a concrete threat: Chinese competition was intensifying, and Korean exporters were losing ground to rivals who had preferential access to major markets. The Peterson Institute for International Economics documented how Korean policymakers concluded they had to use trade liberalization to "lock in" domestic economic reforms - and that the external discipline of an agreement would achieve what domestic politics alone could not.
Korea negotiated the US-Korea Free Trade Agreement - known as KORUS - signed in 2007 and implemented in 2012. The agreement immediately removed tariffs on two-thirds of US farm and food exports to South Korea. US beef had faced a 40% Korean tariff before the deal. Average US agricultural exports to South Korea grew from $5.4 billion in the three years before the deal to $6.37 billion in the three years after, according to the USDA Foreign Agricultural Service.
But Korea protected its most sensitive product: rice. Korean rice farmers kept a 513% tariff rate - permanently excluded from the agreement. Korea opened what it could defend opening, protected what its politics required, and moved forward.
That is exactly what India did in this framework. Wheat, dairy, pulses, maize, rice - all protected. Tree nuts, fruits, soybean oil, distillers' grains - opened up. The question now is whether India follows Korea's next move: using the trade agreement as leverage to drive domestic productivity reforms that make Indian industry genuinely competitive rather than simply protected.
After KORUS, South Korea concluded more than 15 additional bilateral and multilateral trade agreements in 10 years. One deal unlocked the political will for the next. India has that same opportunity now.
Who Is Accountable
Piyush Goyal, India's Commerce Minister, led the negotiations and is the named official responsible for implementation. He made the public commitment that India's core sensitivities in food and agriculture were fully safeguarded, and that the deal opens a $30 trillion market to Indian exporters.
External Affairs Minister Subrahmanyam Jaishankar managed the broader geopolitical framing, particularly the China-alignment dimension of the deal. Foreign Secretary Vikram Misri launched the India-US Trade Facilitation Portal in April.
The Ministry of Commerce and Industry owns implementation. Non-tariff barrier negotiations are due for completion within six months of the framework. Digital trade rules must be negotiated as part of the broader bilateral trade agreement roadmap.
The opposition - led by Rahul Gandhi - has called the deal a "wholesale surrender." The Congress party challenged the BJP to a public debate on the agreement's terms. The BJP did not respond publicly. It is also worth noting who was in power during every previous decade when India's tariff walls were built higher: it was not this government.
What Would It Cost
The costs of not acting are already on record. Goldman Sachs estimated the 50% tariff regime could drag GDP growth down by 0.3 percentage points annually. Indian equity markets saw $19 billion in portfolio outflows during peak uncertainty. The current account deficit had widened to 2.8% of GDP in the fourth quarter as exports dipped and gold imports surged.
The deal reverses those numbers. Goldman Sachs upgraded India's growth forecast to 6.9% for the current calendar year. The rupee was described by Goldman Sachs as the best-performing emerging market currency in the week after the deal.
SBI Research put the potential upside at $45 billion in additional annual trade surplus, plus $3 billion in foreign exchange savings. Those gains compound annually as Indian exporters build new relationships in the US market under competitive tariff terms.
The cost of the concessions India made - particularly opening select agricultural categories - is harder to quantify. The government's stated position is that income support and productivity programs for affected farmers can be funded from the gains elsewhere. That calculation needs to be made explicit, not assumed.
What Needs to Happen Next
First, India must eliminate non-tariff barriers on schedule. The six-month window for completing negotiations - particularly on medical devices, communications equipment, and agricultural import procedures - is binding. Delays will be read by Washington as bad faith and could trigger tariff snapback.
Second, India must use the domestic tariff reduction commitments to accelerate its own manufacturing competitiveness. When Korea opened its agriculture market under KORUS, the Korean government ran compensation and productivity programs for affected farmers. India's agriculture ministry needs an equivalent framework.
Third, India must finalize the full Bilateral Trade Agreement with the US and use it as a template to negotiate similar agreements with the European Union, the United Kingdom, and Gulf Cooperation Council markets. Vietnam, Bangladesh, and Indonesia are competing for the same market access. India must move fast.
Fourth, India must separate energy policy from trade policy. The oil sourcing commitment carries a real cost. For every $10 increase in oil prices, India's import bill jumps by over $10 billion while inflation climbs at least 0.3 percentage points, per The Diplomat's analysis. India needs a clear plan for energy cost management as it diversifies supply.
Fifth, India must build a permanent domestic political coalition for openness. The Cato Institute's retrospective on India's liberalization is instructive: areas that were comprehensively liberalized saw corruption fall as license-seeking became irrelevant. The political rewards from openness are real - but only if leaders claim them explicitly rather than letting the protectionist narrative fill the vacuum.