Indo-US trade | Father of all deals

After six months of rancour, brinkmanship and bruised egos, India and the United States finally stepped back from the brink following a heart-to-heart chat Prime Minister Narendra Modi had with President Donald Trump over phone on February 2. Trump gave an inkling of the thaw on Truth Social by first posting a photograph of india today’s recent Newsmaker of the Year 2025 cover, titled ‘The Mover & The Shaker’, featuring Modi and him. Soon after, he posted another message describing Modi as “one of my greatest friends” and saying “as per his request, effective immediately, we agreed to a trade deal” that would see America reduce its reciprocal tariff from 25 per cent to 18 per cent.That sounded like music to Indian establishment’s ears till Trump proceeded to list the attendant conditions, leaving them scrambling to defend their position. The US president said India had agreed to reduce its tariff and non-tariff barriers on US goods to zero and also to stop buying Russian oil. Besides, he added, the Indian prime minister had committed to “Buy American” at a much higher level in addition to over $500 billion worth of US energy, technology, agricultural products and coal. THE INDIAN RESPONSEModi’s tweet soon after was more circumspect, calling Trump “his dear friend” and thanking him for reducing the tariffs. The prime minister avoided mention of Trump’s conditions but said he was looking forward to taking their partnership to “unprecedented heights”. He also lauded Trump’s leadership in ensuring global peace and stability, a move many saw as a way to assuage the US president after India refuted his repeated claims of brokering peace in the India-Pakistan conflict last May..preferred-source-banner{ margin-top: 10px; margin-bottom:10px;}While Trump’s post made no mention of lifting the additional 25 per cent tariff penalty on India for buying Russian oil, the new US ambassador to India, Sergio Gor, who is believed to have played a big role in clinching the deal, told india today that it would be lifted too, and 18 per cent would be the overall tariff. Meanwhile, officials in India’s commerce ministry clarified that the $500 billion annual trade figure Trump cited was a target to be reached over five years and mirrored the commitment the two countries had made during Modi’s February 2025 bilateral visit, shortly after Trump’s second term began.To counter the Opposition’s charge that Modi had “sold the country to the US”, Union commerce minister Piyush Goyal clarified that “India’s core sensitivities in food and agriculture have been fully safeguarded. This landmark agreement will unlock new opportunities for MSMEs, entrepreneurs, skilled workers and industry, enable access to advanced technologies, and support India’s vision to make in India for the world”. The detailed contours of the agreement, the minister added, would be out shortly and the two sides will work expeditiously to complete the “necessary technical processes and finalise the paperwork related to the trade deal”. THE SAVING GRACEDespite the lack of details, experts termed it the “father of all deals” since it came on the back of India signing a “mother-of-all” trade deals with the European Union a week earlier. There is no doubt that the new Indo-US deal has several significant benefits. Besides removing an acute competitive disadvantage for Indian trade, it cools a volatile relationship and restores a degree of predictability to Indo-US ties. What the deal very definitely does not do is restore the pre-tariff order in which India’s average exposure to American levies was around 2.5 per cent. But it does save India from being, along with Brazil, the most heavily penalised US trading partners with a tariff of 50 per cent. Arun Singh, a former Indian ambassador to the US, says, “What the deal does do is remove the sharpest edge of disadvantage. For that reason alone, it should be welcome.” At 18 per cent, India will be in a marginally better tariff position than many competing ASEAN economies, which face around 20 per cent, while Pakistan and Bangladesh pay 19 per cent. In labour-intensive sectors like textiles, footwear, light manufacturing and engineering goods, this will restore the balance for India. Though the US is India’s largest trading partner, it will be harder to bump up trade to $500 billion from the $210 billion-odd currently.The deal’s other benefit is that it puts India-US relations on a more even keel, a good enough reason, as Evan A. Feigenbaum, former US deputy assistant secretary of state for South and Central Asian affairs, says, for both leaders to celebrate and take the win. He does caution, though, that “Let’s not talk as if the past six months somehow just went ‘poof’ in a magical puff of fairy dust and smoke. International politics and domestic politics are not populated by unicorns and leprechauns, so there really is such a thing as collateral damage”. Also, Trump-style trade deals, as many countries have realised, are thin on detail, heavy on optics, and potentially reversible. In the weeks ahead, Indian negotiators should ensure there are no devils in the detail that could derail relations again.- EndsPublished By: Mansi Published On: Feb 6, 2026Must Watch

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Indo-US trade | Father of all deals

While the devil may be in the details, the Indo-US agreement returns ties to an even keel and restores India's competitive edge in key labour-intensive sectors

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