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Info Service on WTO and Trade Issues (Feb26/03) Geneva, 3 Feb (D. Ravi Kanth) — United States President Donald Trump on 2 February announced an ambitious trade agreement with India, suggesting that New Delhi will “reduce their tariffs and Non-Tariff Barriers against the United States [agricultural and manufactured goods] to Zero” and in return, “the United States will charge a reduced Reciprocal Tariff, lowering it from 25% to 18%.” In a post on Truth Social on 2 February, President Trump claimed that “the Prime Minister [Narendra Modi] also committed to “BUY AMERICAN,” at a much higher level, in addition to over $500 BILLION DOLLARS of US Energy, Technology, Agricultural, Coal, and many other products.” President Trump also revealed that the Indian Prime Minister “agreed to stop buying Russian Oil, and to buy much more from the United States and, potentially, Venezuela,” claiming that “this will help END THE WAR in Ukraine, which is taking place right now, with thousands of people dying each and every week!” Meanwhile, the new US envoy to New Delhi, Ambassador Sergio Gor, indicated that since India had agreed to stop buying Russian oil, the punitive 25% levy on India would be removed, bringing the overall tariffs on the country from 50% to 18%. MODI’S RESPONSE Minutes after President Trump’s post on Truth Social, Prime Minister Modi posted on X (formerly Twitter), writing: “Wonderful to speak with my dear friend President Trump today. Delighted that Made in India products will now have a reduced tariff of 18%. Big thanks to President Trump on behalf of the 1.4 billion people of India for this wonderful announcement.” However, Modi did not mention the zero percent tariff and non-tariff barrier commitments made by India. It is also unclear what level of commitments India made in areas such as intellectual property rights, trade in services, and the moratorium on customs duties on electronic transmissions, said people familiar with the development. The Indian prime minister did not indicate the zero percent tariffs offered for American farm products entering the Indian market, where more than 800 million small farmers, with holdings of around three acres, depend on agriculture. A zero percent tariff for American farm products – grains, dairy, poultry, including goat and sheep products, GM-products such as corn and soya, fruits and vegetables – could destroy livelihoods in Indian rural areas, said people familiar with the development. Unlike the roughly 30,000 wealthy US farmers who depend on agriculture, which yields hundreds of billions of dollars in revenue, Indian farming is the largest economic activity in the country yet it yields meagre earnings, according to several studies. After almost seven months of high tariffs on Indian goods – comprising a 25% reciprocal tariff on grounds that India had a trade surplus of around $40 billion with the US in 2024, and an additional 25% tariff due to Indian purchases of Russian oil – Washington’s new 18% tariff on Indian goods appears to be a rather small prize in comparison with rates for several other countries. An intra-country reciprocal tariff comparison reveals that Washington appears to be inconsistent in its tariff application. For example, the US charges a reciprocal tariff of 19% on goods from Pakistan, 20% on goods from Bangladesh, and 19% on goods from Indonesia. Given India’s status as the world’s most populous country, conceding zero percent tariffs to American farm products – with whom India has had several trade disputes – appears like a proverbial one-way street, said a former Indian trade negotiator. Earlier, Trump claimed – without qualification – that India had agreed to reduce tariffs on American goods to “nothing,” implying a zero-percent tariff level. The first tangible sign of capitulation came with New Delhi’s abrupt decision to slash cotton import duties from 11% to zero percent. Ostensibly aimed at aiding struggling textile exporters by lowering input costs, the move threatens the livelihoods of millions of smallholder cotton farmers across the states of Gujarat, Maharashtra, and Telangana. The irony appears to be rather stark: even as Indian farmers face potential ruin from cheap imports, Indian textile exports are slapped with a punitive 50% US tariff – a double bind that reeks of imbalance. When Prime Minister Modi thanked President Trump on behalf of 1.4 billion people, he did not reveal whether hundreds of millions of India’s poor farmers will be able to withstand the zero percent tariff on American farm products, said several former Indian trade negotiators, who spoke on the condition of anonymity. INDIA-EU TRADE DEAL The recent framework agreement with the European Union, dubbed the “mother of all deals,” gave an inkling that what New Delhi offered to Brussels would be almost on the same lines as what it had already agreed with Washington, said analysts. Given the range of market access concessions offered to European farm and non-farm products, including accepting the Carbon Border Adjustment Mechanism and deforestation penalties, it now appears crystal clear that India might have agreed to even more with the US, said a former trade envoy, who asked not to be quoted. The promises to protect agriculture and resist genetically modified (GM) crop imports – long-standing pillars of India’s food sovereignty – appear increasingly fragile, and it seems that New Delhi may have “swallowed the US demand”, said another trade negotiator, who asked not to be quoted. The negotiator said with the announcement of zero percent tariffs on American farm products, US agribusiness could gain unprecedented access to India’s rural economy. In the financial sector, openings are being created for American corporate interests under the guise of liberalisation. The latest acquisition of Bengaluru-based fintech firm Axio by Amazon – granting the e-commerce giant a direct lending license – appears to be more than a business deal. In December, seemingly under pressure from American and European insurance companies, the Modi government announced 100% foreign ownership in the sector, an area India had resisted in the Uruguay Round of trade negotiations that led to the establishment of the World Trade Organization in 1995. New Delhi justified the move, saying that it would attract global capital, enhance competition, and improve the quality of insurance services. However, it appears to be a dire signal: India’s financial gateways are being pried open, even in areas critical to economic sovereignty. It is also unclear whether India agreed to the US demand for the continuation of the moratorium on customs duties on electronic transmissions, an issue which the Modi government had vehemently opposed at the WTO’s 13th ministerial conference (MC13) in Abu Dhabi in March 2024. Incidentally, the Trump administration continues to impose a 25% sectoral tariff under Section 232 of the Trade Expansion Act of 1962 on items such as steel, aluminum, buses, automobiles and auto parts (which Indian companies export to the US), copper, furniture, lumber, and trucks. A WTO dispute panel had ruled against the Section 232 tariffs, but the US appears to have turned a deaf ear to the ruling. Meanwhile, the Trump administration continues to push its destabilising cryptocurrency agenda, seeking regulatory leniency that could compromise India’s financial stability – all under the banner of “free trade.” Trump insists the relationship is “totally one-sided,” favouring India. This claim appears to ignore reality: American corporations – from Big Pharma to tech giants like Amazon and Google – have reaped enormous profits in India’s growing consumer market, according to several studies. Furthermore, the US position ignores decades of multilateral trade rules and India’s development imperatives. Reducing complex economic relationships to tariff arithmetic is not just misleading – it’s manipulative, said a former Indian trade envoy, who asked not to be quoted. WAKE-UP CALL Last year, a powerful coalition of civil society organizations (CSOs), led by the Forum for Trade Justice, issued an Open Letter, titled “Why India must not give in to US tariff blackmail.” The message was urgent and unambiguous: the visible tariff war is a smokescreen for deeper, structural demands that could permanently compromise India’s sovereignty. The letter warned that behind closed doors, India may be pressured into irreversible concessions in areas that define national autonomy: * Pharmaceuticals: US demands to allow “evergreening” of patents would dismantle India’s world-renowned generic drug ecosystem – built on Indira Gandhi’s 1970 decision to prioritise public health over corporate profits. The result could be skyrocketing medicine prices and a blow to global health leadership. * Digital Sovereignty: India could be forced to abandon digital service taxes, permit unfettered cross-border data flows, and even share public data with US tech firms – undermining data localisation efforts and national security. * Government Procurement: The US seeks preferential access to India’s vast public procurement market, potentially exceeding the terms granted in the recent UK-India FTA – without reciprocal benefits. * Foreign Policy Subordination: The demands go beyond trade. Washington is pushing India to halt oil imports from Russia, Iran, and Venezuela; dilute its role in BRICS; and abandon initiatives to trade in local currencies. This is not trade negotiation – it is strategic coercion. What’s at stake is not just market access, but India’s right to self-determination. Any agreement that trades long- term policy autonomy for temporary tariff relief is not a victory – it is a surrender. In its seeming rush to appease Washington and project strength at home, the Indian government risks a far greater loss than any export setback: the erosion of its sovereign authority to shape laws, regulate industries, and protect its people. The real danger isn’t tariffs – it’s the quiet, irreversible transfer of policy control to a foreign power. India must not barter its sovereignty for the illusion of a quick fix. The time has come for transparency, democratic scrutiny, and a trade policy rooted not in fear or political optics, but in the enduring interests of its people. +
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