India is finalizing a trade deal with Trump, but it’ll cost it an economic arm and a leg
India is on the verge of signing a major trade agreement with US President Donald Trump, but behind the shiny headlines lies the blunt reality—this deal could slice straight through India’s long-protected economic armor.
The country once known for its proud “tariff king” reputation is preparing to drop its guard. The cost? Potential blows to its manufacturing base, local industries, and possibly even sovereignty over economic choices.
Trump, who slapped a 26% tariff on Indian exports last month before hitting pause, has called India’s trade barriers outrageous more than once. The new draft deal being discussed is India’s sharp pivot.
CNBC claims New Delhi has offered to remove import taxes on pharmaceuticals, auto parts, and steel from the US, at least for a capped amount. On the surface, it looks mutual. In reality, it’s not. India has kept those duties high for a reason—to keep its domestic factories alive. Slashing those now, just to stay in Washington’s good books, could wreck entire sectors.
India’s tariff wall is crumbling fast
India’s average tariff rate still stands at 17%, according to the World Trade Organization—five times what the US charges on incoming goods. India’s duties help protect everything from agriculture and IT hardware to footwear, car parts, gold, and jewelry. If zero-tariff doors swing open for US products, those protective layers vanish.
Trump knows that, and he’s using the threat of suspended tariffs to pressure India into compliance. So far, it’s working. He recently said the deal was “coming along great.” And of course it is—for him. But this isn’t just about diplomatic ego. India needs the deal. Trade with the US hit $129 billion in 2024. India held a $45.7 billion surplus, something Trump has been itching to crush.
With economic growth stuck around 6%, India is desperate to scale higher. Pushing it to 8 or 9% means the country needs to attract more foreign capital and expand into global markets. And let’s be honest: Washington’s nod helps with both. But the fine print will be a pain.
There’s a fear that the US might flood India with its products under the new structure. Sure, zero duties sound good on paper. But what does that mean for India’s “Make in India” push? Analysts argue that the real damage might be industry-specific, but that doesn’t mean it’s harmless.
Trump’s deal could wreck India’s core industries
India might not need to panic over every sector. For example, importing steel from the US makes zero economic sense for Americans. It’s a losing game after factoring in freight costs. Even if the tariff wall drops, US steel isn’t likely to flood Indian markets. But that’s just one small win in a sea of losses.
In pharma, the US mainly exports high-end, patented drugs priced for the elite. Indian consumers won’t buy that stuff at scale, even without tariffs. So again, maybe no direct danger there.
The bigger nightmare is if India’s generic drug makers—who already operate on razor-thin margins—get forced to build factories in the US. That would wreck their cost model. Worse, if Washington slashes imports of Indian generics under this “new deal,” it could cripple one of India’s strongest export engines.
Then there’s automobiles. American carmakers like Ford and General Motors have tried and failed to win over Indian drivers. The demand gap is too wide. Most people want either ultra-cheap Indian brands or high-end European rides. Americans sit awkwardly in the middle.
So it’s not like there’ll be a stampede for US cars. Still, offering zero-tariff access opens the door, even if nobody walks through it. Local players like Tata, or Japanese and Korean giants like Toyota, Suzuki, and Hyundai are already deeply embedded in the market.
But make no mistake—this deal won’t be painless. India’s economy runs on careful protectionism. Letting go of that structure risks long-term pain. If the government caves too hard, it could set off a chain reaction, forcing domestic businesses into cost-cutting or shutdowns.
And yet, Wall Street’s smiling. Investors are already placing bets.
Across the stock market, banking, materials, and healthcare stocks are all flashing green in anticipation. Financials, especially, are expected to boom if the deal closes.
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India is finalizing a trade deal with Trump, but it’ll cost it an economic arm and a leg
India is on the verge of signing a major trade agreement with US President Donald Trump, but behind the shiny headlines lies the blunt reality—this deal could slice straight through India’s long-protected economic armor.
The country once known for its proud “tariff king” reputation is preparing to drop its guard. The cost? Potential blows to its manufacturing base, local industries, and possibly even sovereignty over economic choices.
Trump, who slapped a 26% tariff on Indian exports last month before hitting pause, has called India’s trade barriers outrageous more than once. The new draft deal being discussed is India’s sharp pivot.
CNBC claims New Delhi has offered to remove import taxes on pharmaceuticals, auto parts, and steel from the US, at least for a capped amount. On the surface, it looks mutual. In reality, it’s not. India has kept those duties high for a reason—to keep its domestic factories alive. Slashing those now, just to stay in Washington’s good books, could wreck entire sectors.
India’s tariff wall is crumbling fast
India’s average tariff rate still stands at 17%, according to the World Trade Organization—five times what the US charges on incoming goods. India’s duties help protect everything from agriculture and IT hardware to footwear, car parts, gold, and jewelry. If zero-tariff doors swing open for US products, those protective layers vanish.
Trump knows that, and he’s using the threat of suspended tariffs to pressure India into compliance. So far, it’s working. He recently said the deal was “coming along great.” And of course it is—for him. But this isn’t just about diplomatic ego. India needs the deal. Trade with the US hit $129 billion in 2024. India held a $45.7 billion surplus, something Trump has been itching to crush.
With economic growth stuck around 6%, India is desperate to scale higher. Pushing it to 8 or 9% means the country needs to attract more foreign capital and expand into global markets. And let’s be honest: Washington’s nod helps with both. But the fine print will be a pain.
There’s a fear that the US might flood India with its products under the new structure. Sure, zero duties sound good on paper. But what does that mean for India’s “Make in India” push? Analysts argue that the real damage might be industry-specific, but that doesn’t mean it’s harmless.
Trump’s deal could wreck India’s core industries
India might not need to panic over every sector. For example, importing steel from the US makes zero economic sense for Americans. It’s a losing game after factoring in freight costs. Even if the tariff wall drops, US steel isn’t likely to flood Indian markets. But that’s just one small win in a sea of losses.
In pharma, the US mainly exports high-end, patented drugs priced for the elite. Indian consumers won’t buy that stuff at scale, even without tariffs. So again, maybe no direct danger there.
The bigger nightmare is if India’s generic drug makers—who already operate on razor-thin margins—get forced to build factories in the US. That would wreck their cost model. Worse, if Washington slashes imports of Indian generics under this “new deal,” it could cripple one of India’s strongest export engines.
Then there’s automobiles. American carmakers like Ford and General Motors have tried and failed to win over Indian drivers. The demand gap is too wide. Most people want either ultra-cheap Indian brands or high-end European rides. Americans sit awkwardly in the middle.
So it’s not like there’ll be a stampede for US cars. Still, offering zero-tariff access opens the door, even if nobody walks through it. Local players like Tata, or Japanese and Korean giants like Toyota, Suzuki, and Hyundai are already deeply embedded in the market.
But make no mistake—this deal won’t be painless. India’s economy runs on careful protectionism. Letting go of that structure risks long-term pain. If the government caves too hard, it could set off a chain reaction, forcing domestic businesses into cost-cutting or shutdowns.
And yet, Wall Street’s smiling. Investors are already placing bets.
Across the stock market, banking, materials, and healthcare stocks are all flashing green in anticipation. Financials, especially, are expected to boom if the deal closes.
Your crypto news deserves attention - KEY Difference Wire puts you on 250+ top sites
Read More