Trump’s Trade Tweet Hands India Tariff Relief, But at a High Strategic Cost

President Donald Trump’s latest trade tweet has offered India a momentary reprieve from escalating tensions with Washington, but the terms implied by his announcement suggest that the relief may come at a steep and uneven price. Coming soon after the EU–India free trade agreement, widely read in diplomatic circles as Europe’s answer to US pressure over Greenland and fraying NATO ties, the Trump–Modi exchange appears to reopen the door to a bilateral India–US deal that New Delhi has long sought. The question is whether the price of entry is now uncomfortably high.

At first glance, the headline concession looks favourable. Trump signalled that reciprocal tariffs on Indian exports to the US would be cut to 18%, offering welcome relief to exporters who have struggled with elevated barriers. Markets, primed for de-escalation after weeks of uncertainty, have already taken this as a positive signal. Yet a closer reading of what India is said to have offered in return reveals a sharply asymmetric bargain.

According to Trump’s account, Prime Minister Narendra Modi has committed to three far-reaching shifts. India would halt crude oil imports from Russia, pivoting instead towards supplies from the US and potentially US-influenced Venezuela. It would eliminate all tariffs and non-tariff barriers on US imports. And it would embrace a “Buy American” pledge, scaling up purchases of US energy, technology, agricultural products, coal and other goods to more than $500 billion.

What makes the trade-off more fraught is what Trump did not clarify. The US president made no reference to the additional 25% punitive tariff that has hovered over India’s trade relationship with Washington. The implication is that this stick remains in reserve, to be wielded if India’s compliance, particularly on Russian oil, falls short. In that scenario, India’s effective tariff burden could rise to more than 40%, leaving Trump with a powerful lever that converts energy geopolitics into a tool of trade enforcement.

The energy dimension is particularly consequential. Russian crude has been a cornerstone of India’s refining economics over the past two years, allowing refiners to secure discounted feedstock and export petroleum products, especially to Europe. A forced shift to US or Venezuelan oil would almost certainly raise import costs. That would squeeze refining margins at home and could ripple through to higher fuel prices in Europe, undermining India’s more than $20 billion annual exports of refined products. The strategic cost would extend beyond trade balances to energy security and pricing power.

The $500 billion purchase figure also warrants scepticism. Trump’s framing suggests Indian imports of that magnitude, a number that bears little resemblance to current trade flows. In 2024–25, India exported about $87 billion to the US and imported roughly $45 billion, taking total bilateral trade to around $132 billion. Even the more modest “Mission 500” goal articulated by the two leaders earlier, of $500 billion in total trade by 2030, was ambitious. Recasting that aspiration as $500 billion of Indian imports alone would require implausible growth rates, far removed from the past six years’ average expansion of about 6.5%.

There is also a conspicuous silence on sectors where India has traditionally drawn firm red lines. Agriculture is the most obvious one, where zero tariffs and the removal of non-tariff barriers would be politically and economically contentious. Less discussed, but potentially just as sensitive, is defence. If the deal is implicitly framed around deeper “Buy American” commitments, does it also place pressure on India to shift defence procurement away from long-standing suppliers such as Russia and France towards the US? The tweet offers no guidance, but the question matters, given the scale, strategic implications and long lead times of defence contracts.

Equally telling is the silence on services. Trump’s tweet offered no comfort on H-1B visa fees or the proposed HIRE Act, both of which could materially affect India’s IT services exports, where access to skilled visas remains critical. Without clarity on these issues, the promise of tariff relief on goods looks increasingly one-sided.

Taken together, the contours of the deal sketched by Trump align closely with US priorities. They promise to channel Indian demand towards American energy and goods, curtail Russian influence and protect US jobs, while extracting sweeping market access concessions from New Delhi. That sits uneasily with the more balanced vision of expanding two-way trade that has underpinned earlier bilateral discussions.

Markets may still cheer the immediate easing of tensions. After the post-election jitters in the US and domestic disappointment following the Union Budget, any reduction in tariff risk is welcome. Yet the durability of that optimism will hinge on the fine print. Official confirmation from both Washington and New Delhi is still awaited, and India’s response to claims of zero tariffs on sensitive agricultural imports will be particularly telling.

If formalised, the pact could reshape India’s energy strategy, narrow its $42 billion trade surplus with the US and alter the trajectory of its foreign exchange reserves. More broadly, it underscores the enduring logic of Trump’s “America First” approach: concessions are extracted, not negotiated. For India, balancing closer alignment with Washington against ties with Russia and gains from Europe will test diplomatic agility. For investors, oil flows and tariff clauses, not tweets, will determine whether this truce proves durable.