Oil, tariffs and farming: What we still don't know about US-India trade deal

Oil, Tariffs, and Farming: What We Still Don't Know About the US-India Trade Deal

The anticipation surrounding a bilateral trade resolution between the United States and India has reached a fever pitch. Following numerous high-level meetings and diplomatic discussions, the prevailing mood is one of cautious optimism—yet, profound uncertainty remains.

For months, the global market has watched as the two largest democracies attempted to dismantle years of escalating trade friction. While officials speak of "significant progress" and "shared vision," the actual mechanisms of the announced agreements—especially concerning the three core pillars of energy, agriculture, and import duties—are shrouded in ambiguity.

I recall speaking with a tech exporter in Bangalore just weeks before the recent G20 summit. He summed up the sentiment perfectly: "We are tired of the guesswork. Is my semiconductor destined for a 7.5% tariff? Or zero? We need predictability to invest." That lack of predictability is the fundamental barrier that this supposed breakthrough deal has yet to convincingly overcome.

This ambiguity is not accidental. The deal is complex, touching politically sensitive domestic industries in both nations. Here is a deep dive into the unresolved questions that could still derail or significantly reshape the final outcome of the US-India trade relationship.

The GSP Conundrum: Clarity on Tariffs vs. Retaliation

One of the most immediate points of friction centers on tariffs. The US wants better market access for its products, and India desperately seeks the restoration of its Generalized System of Preferences (GSP) status, which was revoked in 2019. The GSP status had allowed thousands of Indian products to enter the US duty-free.

While the recent talks confirmed that both sides have agreed to drop some pre-existing disputes at the World Trade Organization (WTO), the full extent of this tariff rollback is unclear. Are we talking about a sweeping restoration, or highly targeted concessions?

The critical unanswered question here revolves around *reciprocity*. India initially imposed retaliatory duties on 28 US products—including major commodities like almonds, walnuts, and apples—in response to the GSP removal. These retaliatory duties were substantial, often reaching 20% or more, crippling specific sectors of the American farm economy.

We still lack explicit confirmation on the immediate removal and binding timeline for these specific duties. Furthermore, if the GSP status is not fully restored, what new, lower tariff structure will replace it? This isn't just semantics; it determines the profitability of hundreds of American agricultural producers.

Key areas awaiting definition on tariffs:

• Will India permanently withdraw retaliatory tariffs on US agricultural goods?
• What specific tariff reductions has the US offered on Indian steel and aluminum products?
• Is the restoration of GSP status being offered as a phase-in process, or an all-at-once change?
• How will India handle its continued high import duties on US ICT (Information and Communication Technology) products, which Washington argues are excessive?

Until these figures are codified and the mechanism for restoration is confirmed, trade certainty remains elusive.

The Sticky Wickets: Dairy, Crude Oil, and Medical Device Caps

The headlines might celebrate cooperation, but the truly sensitive areas—oil purchases, dairy imports, and access to India's burgeoning medical market—involve fundamental domestic political battles that have yet to be fully resolved.

The Energy Equation: Beyond Spot Purchases

Oil is a cornerstone of this geopolitical trade relationship. India is one of the world's largest importers of crude oil, and the US aims to be its preferred long-term supplier, reducing India's reliance on sources like Russia and the Middle East. While US crude oil imports by India have surged, the uncertainty is tied to commitment.

What specific volume commitments has India made to the US market, and for what duration? We understand that India wants favorable pricing, but the mechanism for stabilizing that supply chain—especially against global price volatility—is not public. A trade deal needs long-term energy security assurances, not just one-off deals. The depth of the US strategic petroleum relationship with India remains an ongoing negotiation.

Farming Friction: The Sacred Cow and SPS Measures

Agriculture is arguably the most contentious area, particularly concerning dairy and fruit. US dairy producers have long sought access to the massive Indian market, a demand historically blocked by India's cultural and regulatory sensitivities.

India requires certifications that US dairy products have not been derived from cows fed with ruminant-origin blood products—a measure aimed at respecting religious and cultural norms. This technical non-tariff barrier, known as Sanitary and Phytosanitary (SPS) measures, has been a major sticking point.

While reports suggest India has agreed to "some form" of relaxation, the specifics of the new SPS protocol are critically important. If the compliance burden remains prohibitively high, the US market access concession is effectively meaningless. US farm lobbyists are demanding clear, actionable pathways for entry, not simply a vague promise.

Medical Devices: Pricing and Protectionism

Finally, the pharmaceutical and medical device sector is a flashpoint. India, known as the "pharmacy of the world," frequently imposes price caps on essential medical devices (like stents and knee implants) to ensure affordability for its vast population. This impacts major US manufacturers.

The deal must address whether India will soften its price control policies for US firms, or if Washington will accept these caps in exchange for concessions elsewhere. The intellectual property (IP) protection offered to US pharmaceutical companies operating in India is another key technical detail that requires legal clarity.

Beyond the Immediate: The Path to a Comprehensive FTA

The current talks aim for a "mini-deal" or "initial harvest" of agreements—resolving low-hanging fruit to build confidence. However, the ultimate prize for both sides is a comprehensive Free Trade Agreement (FTA). We still don't know if the current resolutions truly pave a smooth path toward that long-term goal, or if they simply kick the toughest issues further down the road.

The uncertainty shifts to deeper, structural issues:

• Digital Trade Rules: Will the two nations agree on data localization requirements and cross-border data flows, a major issue for US tech giants?
• Labor Standards: How will the deal address labor practices and environmental standards, which are essential components of any modern FTA but often areas of divergence?
• Investment Treaties: What framework will govern foreign direct investment (FDI) and provide legal protection for US companies establishing large manufacturing bases in India?
• Timeline for Dialogue: Is there a binding schedule for when comprehensive FTA negotiations must begin, or is this contingent on successful implementation of the current mini-deal?

The key takeaway is that a trade relationship worth hundreds of billions of dollars cannot be solidified by handshake agreements and generalized statements. While the political will to finalize a deal seems stronger than ever, until the specific clauses governing market access for US dairy, the exact volume of crude oil imports, and the final percentage points of retaliatory duties are published, the US-India trade story remains a high-stakes cliffhanger.

Exporters, farmers, and investors in both countries are holding their breath, waiting for the fine print that determines whether this agreement is a genuine breakthrough or merely a temporary diplomatic truce.

Oil, tariffs and farming: What we still don't know about US-India trade deal

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