The temporary trade agreement between India and the United States is facing a test
After a year long negotiation, India and the United States recently reached a temporary trade agreement framework. The Indian authorities insist that the agreement protects their core agricultural interests, but domestic opposition views it as a compromise with the United States. Reuters reported that India and the United States will push for a final agreement, and whether India will reduce its purchases of Russian oil and further open up its agricultural market may become a key influencing factor.
Plan to sign a formal trade agreement in March
The statement released by the White House on the 6th shows that according to the framework of the temporary trade agreement reached by both sides, India will cancel or reduce tariffs on American industrial products, as well as various food and agricultural products; The United States has reduced the "equivalent tariffs" imposed on some Indian goods from 25% to 18%. US President Trump also signed an executive order on the same day, deciding to cancel the additional 25% tariff imposed on India from February 7th due to its direct or indirect import of Russian oil. In addition, India has pledged to expand its imports from the United States and plans to purchase approximately $500 billion worth of energy products, aircraft and their components, precious metals, technology products, and coking coal from the United States over the next five years. The agreement also involves preliminary arrangements between the two parties in areas such as non-tariff barriers, market access, economic security, and digital trade.
The negotiations between the two parties regarding this framework agreement began on February 13, 2025. However, due to significant differences on issues such as the opening of the Indian agricultural market and the procurement of Russian oil, negotiations were deadlocked and tensions escalated. On July 31, 2025, the United States announced the imposition of a 25% equivalent tariff on India. On August 6, 2025, Trump signed an executive order imposing an additional 25% tariff on India on the grounds of "importing Russian oil directly or indirectly". Thus, the combination of the two tariffs has resulted in a total tax rate of 50% for Indian goods exported to the United States.
However, the statement released on the 6th indicates that the United States and India will strive to reach a mutually beneficial bilateral trade agreement. Indian officials recently revealed to Reuters that the two sides plan to sign a formal agreement in March.
Temporary agreement questioned in India
Indian Minister of Commerce and Industry Piyush Goyal held a press conference last Saturday to explain the contents of the agreement. According to Reuters, Goyal praised the framework agreement as opening up a market worth approximately $30 trillion for Indian exporters, especially farmers, fishermen, and small and medium-sized enterprises. He also stated that the agreement guarantees the interests of farmers by comprehensively protecting agricultural and dairy products. He emphasized that due to the lack of relevant provisions in the agreement, the import of genetically modified agricultural products will not be directly opened up; Apples and other fruits will be allowed to be imported through the tariff quota system.
However, the temporary agreement has been strongly questioned and opposed by opposition parties and related organizations in India. The main opposition party in India, the Indian National Congress, accuses the agreement of being reached entirely on US terms, harming the interests of farmers and traders, and "completely abandoning national interests".
According to Babushahi, a media outlet in Punjab, India, the United Farmers' Front strongly condemns the agreement, demands Goyal's immediate resignation, and warns that if the agreement is signed, large-scale protests will erupt across the country. The United Farmers' Front stated that India has agreed to cancel or significantly reduce tariffs on various US agricultural and food products, including soybean oil, feed crops, fruits, nuts, wine, and spirits, which is completely contradictory to Goyal's repeated commitment to "never harm the interests of farmers". The organization also criticized the serious tariff imbalance between the two sides, warning that the United States still imposes tariffs of up to 18% on Indian goods, while India is forced to lower tariffs on American agricultural products to zero. "This is not free trade at all, it will only make Indian agriculture a vassal of American agricultural giants.
Two key factors
Analysts believe that whether India can substantially reduce its purchases of Russian oil as Trump has suggested, and whether the agreement can truly protect the interests of Indian farmers, may be the key to whether the two sides can successfully reach a final agreement.
Trump stated in the executive order that if the Department of Commerce determines that India has directly or indirectly resumed importing Russian oil, it may reinstate the 25% tariff on India. Bloomberg analysis suggests that there is ample reason to believe that Indian buyers will not completely abandon Russian oil in the short term. Compared to oil from the United States and Venezuela, Russian oil transportation is faster and has lower shipping costs. Furthermore, abandoning Russian oil procurement would harm India's relationship with Russia and disrupt its diplomatic balance. Reuters reported that Goyal declined to comment on the Russian oil issue and stated that the Ministry of Foreign Affairs would respond.
Whether Indian agriculture will be impacted will also test the final agreement between India and the United States. Bloomberg reported that India's opening of some agricultural markets to the United States, allowing cheaper American products to enter, may reduce domestic food and feed costs, but at the same time, it will also bring greater pressure to some Indian farmers.
The Hindu newspaper reported that Jalam Ramee, an official in charge of communication affairs for the Indian National Congress, warned on social media that "India's annual imports to the United States will triple, completely wiping out our long-standing trade surplus in goods. India's exports of IT and other services to the United States will still face great uncertainty. ”
Qian Feng, a researcher at the National Institute for Strategic Studies at Tsinghua University, analyzed to Global Times reporters on the 8th that based on the strong willingness of both the United States and India, there is a high possibility of the two countries reaching a final agreement. He believes that the cumulative tariffs of up to 50% imposed by the United States on India have had a significant impact on India's manufacturing industry. India urgently needs to restore its overseas markets, stabilize its exchange rate, solve employment problems, and boost its manufacturing industry. In addition, India is also concerned about further marginalization in the strategic map of the United States, and the Modi government hopes to use trade agreements to resolve disputes and create opportunities for the two countries to return to normal relations.
But the issue of Russian oil procurement will still be the focus of bargaining between the two sides in the future. Qian Feng believes that if India does not handle this issue well, it will not only become a "hidden mine" in the relationship between the two countries, but also put the Modi government in a dilemma of "offending both the United States and Russia". He said that in the short term, India may gradually reduce its purchases of Russian oil in the name of market diversification to meet the requirements of the United States, and ultimately sign an agreement with the United States. But it is not very realistic for India to completely give up importing Russian oil, which once accounted for as much as 40%. Therefore, both parties may reach a certain degree of mutual compromise and tacit understanding in subsequent negotiations.