How The India-US Deal Is A Masterclass In Diplomacy

In the high-stakes world of "Art of the Deal" diplomacy, February 2026 has just delivered a masterclass. The announcement of a new India-US trade arrangement through a phone call between Prime Minister Modi and President Trump followed by a vociferous Truth Social pitch by Trump and a  restrained  X post by Modi, recalibrated the economic compass of the Indo-Pacific. While the full text remains under wraps, the headline is a game-changer: a slash in US tariffs on Indian goods from 50% down to a uniform 18%.

The 18% Breakthrough: A New Floor for Exports

The significance of this 18% figure cannot be overstated. By dismantling the "reciprocal" and punitive layers that had previously pushed duties to 50% (half of which, 25%, was a specific penalty for Russian oil ties), the Trump administration has handed a golden ticket to India’s labour-intensive sectors. For the artisans in Surat’s diamond hubs and the weavers in Coimbatore, and the leather workers in Agra, this is more than a policy shift; it is a lifeline. The US is by far India’s largest market for these sectors, which had already lost their GSP advantage in Trump 1.0.

Markets have reacted with euphoria. The move bridges the competitive gap against other Asian exporters, ensuring that "Made in India" doesn't just mean quality, but price-competitiveness. In Trump’s world, where "zero tariffs" are a unicorn even for FTA partners like Canada, an 18% flat rate is a sign of exceptionalism—a "friendship tax" rather than a punitive one.

The Russian Pivot: More Than Just Oil

The most delicate dance involves Moscow. Trump’s claim that India will "stop purchasing Russian oil" to help "end the war", sounds like a total decoupling. However, New Delhi’s diplomacy is rarely that binary. India has "sensitized" Russia to this shift, framing it not as a betrayal, but as a strategic necessity to unlock the US market. The Putin-Modi Summit in December 2025 had set new perceptions going even as the oil-from- Ukraine-crisis story was concluding. The India EU FTA and the unlocking of the US trade arrangements were likely strategically nudged by the Putin visit and its strategic vision.

However, the oil story hides a deeper structural reality. Non-oil trade with Russia remains remarkably small, hovering around $12 billion compared to the massive energy bills. Outside of fertilisers and diamonds, the commercial basket is thin. The real "sticky" part of the relationship is Defence and Technology. Even as India shifts its energy ledger toward American crude, it remains deeply entwined with Russian military hardware and nuclear technology. By trimming the high-profile oil imports, India buys the diplomatic space to maintain its "legacy" defence ties with Russia, which are too critical to be dismantled overnight. The desire of the US to sell much more to India can use the Russian template of nuclear reactors and transfer of tech for defence acquisitions. Russia remains an important though older model of cooperation which the US is hardly able to emulate.

The $500 Billion Question: 2030 or Today?

There is a fascinating bit of "Trumpian math" regarding the $500 billion commitment. In the February 2025 joint statement, $500 billion was the bilateral trade target for 2030. Yet, the President’s recent messaging suggests a more immediate commitment for India to "buy American" at that scale. Whether this is a rebranding of the 2030 goal or an ambitious new accelerated timeline remains to be seen. If India is to absorb $500 billion in US energy, tech, and defence, it would represent one of the largest shifts in global trade flows in history. I remain sceptical about this as this requires much groundwork.

The EU-FTA: The Strategic Counterweight

While the US deal is the loud, flashy headline, the India-EU Free Trade Agreement (FTA), dubbed the "Mother of All Deals", is the quiet revolution. Finaliwed just days before the US announcement, it provides zero-duty access to a market of 450 million people.

The dual success of these deals means Indian exporters are no longer dependent on a single pole. The EU-FTA provides a stable, rules-based alternative that focuses on high-tech standards, further diluting Russia's influence by offering India European alternatives in the civil-tech and manufacturing space. In any case, Russian limitations in providing a market for Indian traditional exports could not compensate for the advantages of the larger EU and US markets. Russia needs to enhance that and use its rupee hoards to invest more deeply into India. That will give the India-Russia partnership a boost.

The "Gor" Factor and the Rapid Recovery

The rapid ascent of Sergio Gor as Ambassador has been a revelation. Moving from a cautious "one or two years" timeline for a Trump visit to a potential Modi-Trump summit within two months shows a diplomat who has mastered the tempo of both leaders. With EAM Jaishankar currently in Washington to iron out the fine print, the momentum is undeniable. Despite the trade impasse over several months, India was included in the Silica partnership and now in the critical minerals partnership.

India is successfully navigating a world of protectionist walls by building custom bridges. By trading off the high-visibility oil imports for high-value market access, New Delhi has managed to keep the US happy without completely severing the cord with an old, albeit smaller, economic partner in Moscow. The oil was a slippery slope of an opportunity which worked well in an emerging situation. Once its costs became heavy with US additional tariffs, there was only scope to expand the traditional partnership with new hues.

It is tempting to see India as seesawing between Russian and US camps. However, it is clear that the storms of Ukraine and the Trump tariffs were handled with composure in New Delhi. A multipolar strategic approach was used. The European initiative was carried through.  The warmth with Moscow was rekindled. The embrace with Washington will take time to feel warm again.

Gurjit Singh is the Former Ambassador to Germany, Indonesia, Ethiopia ASEAN and the African Union .

(Views expressed are personal)