Washington: The US and India recently announced a landmark trade agreement that sharply contrasts with the tariff standoff that defined their economic ties just months ago, a shift experts say was spurred in part by New Delhi's recent free trade agreement with the EU. President Donald Trump announced the deal last week after a phone call with Prime Minister Narendra Modi, saying the US' 'amazing relationship with India will be even stronger going forward.'
According to Anadolu Agency, the deal commits both sides to lower tariffs on a wide range of goods, expand market access for key sectors such as energy, agriculture and industrial products, and strengthen cooperation on technology and supply chains. The arrangement also includes commitments to improve customs procedures, protect intellectual property, and promote fair competition, according to a White House fact sheet released on Monday.
Despite Trump's assertions about the deal, analysts argue the timing of Washington's move was no accident. It came weeks after India concluded an ambitious free trade agreement with the EU - a pact likely to redraw global trade flows and threaten US access to India's booming market. 'The India-EU FTA has the potential of making the EU India's largest trading partner, leaving the US and China behind. This might have made Trump act faster,' said M. K. Venu, founding editor of The Wire and a commentator on Asian economic affairs.
According to the White House fact sheet, the deal is designed to reduce barriers on goods and services and address longstanding US concerns about market access. Key elements of the agreement include significant tariff reductions on a broad list of products, moving toward eliminating duties that had reached punitive levels during previous disputes; expanded access for US energy exports, including crude oil, LNG and renewables components; new cooperation frameworks for technology, aviation, and manufacturing supply chains; and commitments on digital trade, intellectual property, and regulatory practices meant to lower barriers for US firms.
The EU-India FTA, unveiled late last month and expected to be finalized by 2027 pending parliamentary approvals in Europe, is seen as a major driver behind Washington's shift. European officials have described the deal as one of the most strategic trade agreements of the decade, with the potential to position the EU as India's top trading partner. 'Most export-oriented economies in Asia, like Vietnam, Indonesia, Malaysia, South Korea, and China, have done quite well with their exports in 2025,' Venu told Anadolu. 'China, which suffers a relatively high import tariff of 34% in the US, has recorded its highest trade surplus of $1.2 trillion.'
Trump has sought closer ties with New Delhi to counter the growing influence of the BRICS bloc - a coalition that includes China, Russia, Brazil, and South Africa - and to blunt efforts to challenge the US dollar's dominance. Within India, however, the deal has sparked debate. Opposition parties argue that promises of massive US purchases - including a $500 billion target over five years touted by Trump - are unrealistic given current imports of around $45 billion annually. They warn such commitments could flip India's trade surplus with the US and risk strategic autonomy.
India's strategy of diversifying trade - deepening ties with the EU, the UK and Gulf states - reflects a calculated response to Washington's mercurial approach. Even if the US-India outline results in a formal pact, it must still clear legal and procedural hurdles before entering into force, meaning substantive benefits may be months away. Lucas also questioned the feasibility of Trump's ambitious purchasing targets, but acknowledged that there could be potential gains for Indian pharmaceuticals, textiles, gems and agriculture from lower US tariffs, along with broader benefits in technology cooperation and defense ties.