The ‘Reciprocity Gap’: Why India’s Zero-Tariff US Deal Is A Structural Risk – OpEd

There is a distinct difference between a compromise and a capitulation. Diplomacy often demands the former; the February 2 trade deal with the United States unfortunately resembles the latter. Modi government has confused benevolence with strategy. New Delhi frames this as a "strategic breakthrough," a label that asks the public to ignore the arithmetic staring them in the face. The unvarnished truth is that the government has signed away vast market access while securing absolutely no protective cover in return, locking the nation into a deal that tilts almost entirely in Washington's favour. Beneath the fanfare lies a blueprint for industrial decline, forcing Indian sectors to shoulder the cost of a friendship that benefits Washington almost exclusively.

The arithmetic of the deal is stark, bordering on punitive. India has agreed to reduce tariffs on incoming American goods to zero per cent. In exchange, the United States has agreed to... absolutely nothing. American tariffs on Indian exports will remain firm at 18 per cent.

In the ruthless arena of global commerce, where reciprocity is the golden rule, this is baffling. New Delhi has introduced an immediate structural disadvantage into a $212.3 billion trade relationship. It has volunteered to tie one hand behind the back of its exporters while inviting the heavyweight champion into the ring.

Consider the landscape in which Indian manufacturers must now operate. An exporter from Gujarat shipping textiles to New York faces an 18 per cent barrier upon arrival. Meanwhile, an American agribusiness shipping directly to Punjab faces no barrier whatsoever. The government's stated goal of allowing US exports to India to swell to $500 billion essentially aims to erase India's trade surplus. It replaces profit with debt. More critically, it undermines the decades-long "Make in India" ambition by flooding local markets with highly subsidised foreign products against which domestic producers—lacking protective buffers—cannot possibly compete.

To understand the oddity of this "triumph," one needs only to look at how other nations conduct business with Washington. They do not roll out the red carpet without demanding a key to the door in return. China protects its markets with 34 per cent tariffs on US goods. Smaller economies like Vietnam and Bangladesh hold the line at 20 per cent. Even America's wealthiest allies in the European Union and Japan enforce reciprocity between 20 and 25 per cent.

Vietnam and China know that you do not survive in the global marketplace by hoping for fair treatment; you ensure it by guarding the gate. Having discarded this wisdom, India now stands as an outlier among major economies. It has accepted an asymmetric weight that warps the definition of alliance, creating a dynamic where New Delhi pays for the privilege of a relationship that Washington merely tolerates.

This "Reciprocity Gap" creates a hazardous environment for the Indian economy. Stripping away tariff protection does not merely open the market; it exposes the country's agrarian and small-business base to ruinous volatility. The arithmetic is cruel: a mill owner in Tirupur must now compete with an 18 per cent handicap compared to a rival in Vietnam. This disadvantage is not born of industrial inefficiency, but of diplomatic malpractice—a penalty paid by the citizen because the state could not negotiate a level playing field. The textile mill owner in Tirupur is now effectively 18 per cent less competitive than his rival in Hanoi, not because of a lack of skill or quality, but because his government failed to negotiate the same terms as the Vietnamese.

Why was this agreed to? The prevailing view from the chanceries is that this deal prioritises diplomatic optics over economic hard power. It appears to be an exercise in personal political branding, designed to generate images of camaraderie and high-level handshakes, rather than protecting national economic sovereignty.

There is a difference between opening an economy and abandoning it. Free trade works when traffic moves in both directions. When the gates are flung open only one way, it is no longer trade; it is dumping.

The Modi government will frame this deal as a monument to friendship, a necessary step in aligning with the West. But friends do not ask friends to deindustrialise. The underlying numbers reveal an asymmetric submission that risks hollow out domestic capacity. As foreign goods wash over the border tariff-free, and Indian goods hit a tax wall in return, history may record this not as the moment India arrived on the global stage, but the moment it sold its ticket.