Donald Trump’s chaotic act continues. His latest move: slapping a 25 percent tariff and a penalty on Indian goods exports to the United States.
It’s vintage Trump – unapologetic – designed to get the other side, in this case India, to surrender to his demands. He is like a kid in a candy shop, who has rich parents and knows that he can keep throwing tantrums, as and when he feels like, over and over again.

In the post announcing 25 percent tariffs on India, Trump said: “Remember, while India is our friend, we have, over the years, done relatively little business with them because their Tariffs are far too high, among the highest in the World.”

In 2024-25, India’s goods exports to the US stood at $87 billion. At the same time the Indian goods imports from the US were $45 billion. This implies a trade deficit of $42 billion (imports minus exports). So, clearly the US buys more goods from India than India does from the US.

Of the $45 billion that we pay for buying US goods, around $10 billion is paid for crude oil and petroleum products, implying we buy other goods worth $35 billion from the US.

India’s high tariffs

In a Fact Sheet published by the White House in April 2025 it was pointed out that India’s average tariff rate is 17 percent, whereas that of the US is 3.3 percent.

This is the simple average tariff rate and is on the higher side because of high tariffs on sectors like agriculture and automobiles. If we look at the weighted average mean of Indian tariffs, data from the World Bank suggests that in 2022 it was at 6 percent.

So, is the US’s trade deficit with India just because of India’s high tariffs?
In 2024-25, India imported goods worth $114 billion from China. Almost none of this constituted imports of crude oil and petroleum products. We exported goods worth $14.3 billion to China, of which petroleum products constituted $1.3 billion.

This means that like the US runs a trade deficit of $42 billion with India, India runs a trade deficit of close to $100 billion with China.

The point is, despite India’s high tariffs that Trump talked about, China still manages to sell $100 billion more in goods to India than it buys from it.

So, why is that? China produces many goods that Indians want and at price points they can afford. The same is not true about the US, implying that the country is not competitive enough in many sectors.

The Russian oil

In another post, Trump said: “I don’t care what India does with Russia. They can take their dead economies down together, for all I care.”

Indeed, the Indian economy has its share of complex problems – huge income and economic inequality, youth unemployment, lack of job skills among the youth, not enough private investment and a government which has too many other interests than pursuing social and economic growth. But India, for all its problems, is no failed economy.

Between 1990 and 2024, India grew by 6.1 percent per year (World Bank Data, constant 2015 US$). From 2014 to 2024, India has grown around 6 percent per year. Failed economies don’t grow by 6 percent per year.
Trump has also got problems with India importing oil from Russia. In 2024-25, India’s import dependency of crude oil stood at 88.2 percent, implying that more than 88 percent of the crude oil that the country consumed had to be imported. For April to June 2025, this figure has jumped to 89.4 percent.

India does not produce enough crude oil and given that the commodity needs to be imported. Further, the huge price that the country pays for it, it’s only practical that it tries to bring down its oil import bill.

In 2022-23 and 2023-24, the average price that India paid to Russia for importing oil was significantly lower than the overall average price that it paid for importing crude oil. In 2024-25, this difference considerably narrowed.

Now, lower prices weren’t the only reason that India was buying Russian oil. A good portion of it was refined and exported to the countries of the European Union. A Reuters report says that India’s government owned oil companies have stopped buying oil from Russia.

A quick trade deal?

So, where does that leave India? Should it negotiate a quick trade deal with the US or risk being left out of the new economic alliances which are emerging? This is a very tricky question.

It is worth remembering that the global trade system that emerged post the end of Second World War, took decades to negotiate. It didn’t happen overnight, or in a few weeks, or in a few months, or even in a few years for that matter.

If a trade deal is happening in a matter of a few months, it’s only possible if one side largely gives in to whatever the other side is offering. In this case, this means India largely agrees to whatever the US has to offer.

There is one school of thought that believes that India should agree to what the US wants and get a trade deal in place. If it doesn’t do that it runs the risk of its goods exports to the US becoming uncompetitive given that countries like Vietnam, Thailand, Bangladesh etc., have ended up with tariff rates lower than 25 percent. 

It could also mean that big companies like Apple and Samsung, which have started looking at India at least as a product assembly hub in recent years, could look at moving operations to other countries. The Times of India quoted an industry official as saying: “Companies like Apple and Samsung will divert India production to markets such as those in Europe and Asia.”
This is a real risk. So, should then India quickly agree to whatever the US wants?

The agriculture red line

Now, Indian goods exports to the US are only one part of the whole story. What India will end up importing from the US, if a deal is quickly done, is the other part and the more important part.

One reason India hasn’t bowed to US pressure – unlike many other countries – is its resistance to opening up its agricultural markets. In a Fact Sheet published by the White House in February 2025 it was pointed out that the US average tariff rate on agricultural goods is 5 percent whereas that of India is 39 percent.

Another Fact Sheet published in April pointed out that apple imports into India faced a tariff of 50 percent. They enter the US duty free. Or the fact that import of rice in the husk (paddy rice) faced a tariff of 2.7 percent in the US and 80 percent in India.

The US obviously wants these tariffs to be lowered majorly or for that matter even done away with. Is India ready for agricultural produce from the US – farmed by large and corporate farmers and majorly subsidised by the US government – hitting the Indian markets?

Agriculture forms around 13 percent of the Indian economy (in constant terms adjusted for inflation), but it employed 46.1 percent of the labour force in 2023-24, the latest data available. In fact, this proportion has gone up in recent years. In 2018-19, before the pandemic broke out, the sector had employed 42.5 percent of the labour force. In comparison, the proportion employed in the manufacturing sector has fallen from 12.1 percent to 11.4 percent.

The point being that India isn’t creating enough jobs to allow people to move away from agriculture into more productive sectors. In this scenario, letting small Indian farmers to compete with large and mechanised US farmers isn’t the best idea going around, neither economically nor politically.

Indeed, the Modi government is a master at spin, but capitulating to the US on agriculture is a move even it would struggle to justify.

In fact, one of the things that might be hurting the government’s spin currently is the fact that Prime Minister Narendra Modi’s friendship with Donald Trump has been actively talked about over the years. But this much-talked about friendship doesn’t seem to have helped India in the trade negotiations with the US.

Also, if push comes to shove, and the choice is between hurting India’s manufacturing and other formal sectors vis a vis agriculture, from the point of spin and from the point of politics, it makes more sense to let the manufacturing sector be hurt. It will be very difficult to protect both.
Finally, as mentioned at the beginning of this piece, Trump is like a kid in a candy shop, who knows that he can keep throwing tantrums as and when he feels like, and over and over again.

So, let’s say India decides to agree to the US terms, does the whole thing stop with this, or does Trump wake up, a few weeks later, a few months later, and starts talking about India’s huge services exports to the US? Everything from IT services – which seem to be in some trouble – to Global Capability Centres. And if that happens – what will India surrender next?
Trump’s tantrums may make headlines, but trade deals require hard choices. Giving in may be the easy way out, but selling out agriculture or risking services exports isn’t sustainable. India must hold its ground, not just for farmers – but for its long-term economic sovereignty. Because with Trump, today’s deal may be tomorrow’s demand. 

Vivek Kaul is an economic commentator and a writer.

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