India Trade Agreement Faces Risks: U.S. Tariff Monitoring and Temporary Structure Tug-of-War

According to the latest analysis by Jin10机构, the recently signed trade agreement between India and the United States exhibits unusual characteristics. The negotiation results between India and the U.S. are not based on a traditional trading partnership built on mutual respect and equal mutual benefit, but are evaluated as a temporary structure similar to the International Monetary Fund (IMF) rescue framework. This wording deeply reflects the current imbalance of power in trade negotiations.

The Temporary Nature of the US-India Trade Agreement and International Comparison

In stark contrast to formal business agreements signed with Southeast Asian countries such as Thailand, Malaysia, Indonesia, and Vietnam, India has obtained a trade framework officially described as “temporary.” This phrasing itself implies uncertainty and variability in the agreement. Indian businessmen and policymakers have perceived this key difference when reviewing the agreement text, indicating that India is at a disadvantage regarding trade stability.

The True Cost and Implicit Conditions of the Halved Tariffs

On tariffs, India’s exporters have indeed received some relief. The high 50% tariffs implemented since August have been reduced to 25%, which is a positive signal for the competitiveness of Indian goods in the U.S. market. However, this tariff reduction is not an unconditional trade concession but carries clear political conditions. The U.S. explicitly characterizes the remaining 25% tariff as a “punitive measure” against India, citing India’s indirect funding of Putin’s military actions in Ukraine through the purchase of Russian oil. This framing transforms a traditional trade dispute into a geopolitical issue.

Ongoing Monitoring Mechanism and Long-term Uncertainty

The Trump administration established a dedicated committee led by Trade Secretary Howard Lutnick through an executive order. The committee’s responsibility is to continuously monitor whether India “directly or indirectly” imports Russian oil. This open-ended definition gives the U.S. government maximum flexibility—they can, at any time, reinstate the punitive 25% tariff based on the committee’s assessment. This mechanism essentially turns India’s trade privileges into a dynamic, politically susceptible variable rather than a stable trade framework.

For Indian exporters and policymakers, this agreement reflects a new trade reality: benefits are conditional, revocable, and subject to external oversight. This structure introduces new uncertainties for India’s economic growth.