India Opens Its Market, the US Keeps Its Levers

The newly-announced US–India interim trade framework, designed as a precursor to a full Bilateral Trade Agreement, is music to Indian exporters deeply affected by sudden high tariffs. India has pledged to eliminate or cut tariffs on a swath of US industrial and agricultural goods. The US has agreed to trim punitive tariffs on Indian exports.

However, the Joint Statement text perpetuates a structural asymmetry in market opening. While the US has preserved discretion and leverage in its concessions, India has provided structural market access. India possesses limited, if any, tools to bind US commitments reciprocally. This asymmetry reflects US motivation and mindset of locking in partners into managed concessions and conditional access.

India commits to eliminate or reduce tariffs on all US industrial goods and a wide range of agricultural products, including dried distillers’ grains, red sorghum, tree nuts, processed fruit, soybean oil, and wine and spirits. Tariff reduction will be structurally embedded in India’s domestic tariff schedule and regulatory approach. It will deliver far-reaching market opening across manufacturing and agri-food sectors.

The US, however, will apply a reciprocal 18% tariff on Indian goods, subject to reduction only upon successful conclusion of the interim framework, and only then remove tariffs on a range of goods identified in an annex to executive orders, which include generic pharmaceuticals, gems and diamonds, and certain aircraft parts.

The US will remove tariffs that were imposed under national security proclamations related to aluminium, steel, and copper (Proclamations 9704, 9705, and 10962), although limited to certain aircraft and aircraft parts, which will positively impact Indian exporters.

National security proclamations are within the ambit of executive powers and can be imposed at any further time, were the US to find it expedient to limit Indian imports. This is an uncertain, unpredictable gain under the current regime, tethered to US perceptions of its national security considerations.

Similarly, in the automotive sector, India is to receive a preferential tariff-rate quota (TRQ) for automotive parts, subject to tariffs imposed under Proclamation 9888 (adjusting imports of automobiles and automobile parts for national security). A TRQ binds preferential access only up to specific volumes, after which higher tariffs still apply.

In the generic pharmaceuticals export sector of core interest to India, the framework again offers conditional relief of ‘negotiated outcomes’ dependent on findings of a US Section 232 investigation. This makes tariff and regulatory relief contingent on a future domestic determination in the US, rather than a negotiated, guaranteed outcome.

In contrast, India’s commitments do not build in comparable conditional tools. India’s recent TEPA with EFTA illustrates this gap. EFTA’s investment commitments of $100 billion, though an innovative action to secure FDI, are not linked to market access until 15 years. Further, they are contingent on Indian GDP growth of 9% in dollar terms, raising apprehensions of uneven implementation. This same gap appears in the US framework agreement.

What is the lesson for India?

If trade agreements are increasingly instruments of strategic leverage, then tariff reductions are an incomplete tool. Future trade frameworks should embed ‘reciprocal conditionality’ by linking market access to tangible outcomes in investment, technology transfer, defence industrial collaboration, and supply-chain integration. India must create domestic instruments to leverage the market access it provides.

India must quietly build domestic legislative and regulatory capacity that allows it to offer conditional tariff liberalisation. In this case, it could be linked to specific guarantees from the US on defence procurement, technology transfer, or market access for strategic goods and services. India must build in a clear linkage between market access and US openness to Indian participation in defence supply chains or technology ecosystems.

The Indian market is growing in more ways than one.

Apart from the traditional high imports of energy, fertilisers, gold and diamonds, and industrial intermediates, imports of archetypal high-end consumer products grew rapidly. Cosmetics and toiletries almost doubled in five short years from $1.4 billion in 2020-21 to $2.5 billion in 2024-25. Similarly, imports of another elite consumer product, cereal preparations, jumped from $163 million in 2020-21 to $249 million in 2024-25. Fresh fruit jumped to $3 billion in 2024-25 from $2.1 billion in 2020-21. Alcoholic beverages more than doubled from $543 million in 2020-21 to $1.1 billion in 2024-25. These are small numbers but indicate a market increasingly demanding high-end products.

The US–India interim framework delivers market opening for both sides, but the architecture of concessions is asymmetrical. The US retains conditional levers and reversible relief, whereas India has front-loaded its liberalisation without equivalent built-in safeguards, trying to make the best out of a deal foisted on it, even as it must read the tea leaves.

With the certain, predictable, multilateral trading order under relentless pressure, India must arm itself with regulatory tools to ensure promised market access. If India is to transform trade negotiations into instruments of sustainable economic strategy rather than episodic liberalisation, it must design mechanisms that bind reciprocally, not just open unilaterally. In a world where trade agreements increasingly intersect with geopolitics, strategy may matter more than openness.