Daybreak - Why the ‘mother of all trade deals’ wasn’t enough against Trump's tariffs

Episode Date: February 4, 2026

Two days ago, the United States said it would cut tariffs on Indian goods to 18%, down from levels that had gone as high as 50%. Markets reacted fast. Stocks rose. The rupee strengthened. The first feeling was relief. It sounded like the trade fight with Washington and Donald Trump was easing.Then more details emerged. U.S. officials said India would commit to buying over $500 billion worth of American goods. They also said U.S. tariffs would stay at 18%, while India would allow zero tariffs on some American products.That relief started to feel more layered.Just days earlier, India had signed the “mother of all trade deals” with Europe.So why did India still move on this U.S. deal, now and on these terms?Host Snigdha Sharma dives in.Listen to our previous episode on the India-EU trade deal here: The 'mother of all trade deals' promises cheaper imports. Prices are another storyIf you have any thoughts on this episode write to us at [e-mail] with Daybreak in the subject line. You can also leave us a comment on our YouTube channel here. Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple Podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. So it's finally happened, as you have probably already heard or read. Two days ago, the United States announced that it was cutting tariffs on Indian goods to 18%,

down from levels that had climbed as high as 50%. markets reacted instantly. In-in-stocks rose, the rupee started to look better, and the main feeling was relief, because it sounded like the fight with Washington and, well, Donald Trump was finally easing. And then the details began to surface. Statements from Trump and the U.S. trade officials say that India committed to buying more than $500 billion worth of American goods over time. In fact, why don't you listen for yourself what White House press secretary Carolyn Leavitt told the American media yesterday. India has agreed to stop purchasing Russian oil to buy more American oil from the United States of America and potentially from Venezuela too.

As you know, the president and his national security team are now dictating the commerce of Venezuela and those oil sales. So this directly benefits the American people as well. And in addition, India has agreed to invest more in the United States, because of President Trump's call to action on that phone call yesterday, Prime Minister Modi committed to $500 billion of purchases of U.S. energy, transportation, agricultural products, and the U.S. tariff on India will now be at 18%. But American exports to India will face a tariff of 0%. So this is a great deal and a huge win for American workers, businesses, and consumers alike.

Notice what she said, that the tariff rate on Indian exports, ports into the US are 18%. Meanwhile, India has agreed to zero tariffs on many American goods that will be entering our market. So, the early relief after the announcement is now starting to feel a bit more layered. Timing also seems to be adding to this tension. Because just less than 10 days ago, India and the European Union had wrapped up a long-awaited free trade agreement after nearly two decades of.

negotiations. European leaders described it as historic, even calling it the mother of all trade deals. If you're a regular listener of Daybreak, I'm sure you remember the episode where I spoke about this deal just last week. What stood out about this EU agreement was how it was reciprocal, rules-based and designed to give India stable access to a major market over the long run. And this backdrop matters, because it looked like India was finally widened. its options and strengthening its negotiating position in global trade. So why did it then give in to this deal with the US on these terms after holding out for so long? The answer has to do with where India was most exposed, how quickly the pressure was building

and what happens when tariffs are already hitting exporters. Welcome to Daybreak, a business podcast from the camp. I'm your host, Nick Dha Sharma, and I Don't Chase the New Cycle. Instead, every day of the week, my colleague Rachel Vargis and I will come to you with one business story that is worth understanding and worth your time. Today is Thursday, the 5th of February. To understand why India moved quickly with the United States, it helps to look at what was already unfolding on the ground when the talks were still underway. In the weeks before the deal was announced, the US had raised tariffs on Indian goods to levels that were described as punitive going unrued. up as high as 50%.

These were not broad theoretical threats. They were applied to duties that exporters had to price in immediately. In-in shipments, entering the U.S. market was suddenly more expensive, less competitive, and harder to plan around. News reports from the time point to pressure across a range of sectors, from textiles and jewelry to engineering goods and industrial products. Exporters, interviewed by Reuters, for example, spoke about cancer. consult orders, margin pressure, and growing uncertainty about whether contracts signed months earlier

still made sense under the new tariff regime. And this matters because of where the US sits in India's trade map. The United States is India's largest export destination, particularly for high-value areas such as IT services, pharmaceuticals, textiles and manufactured goods. And that concentration means that trade disruptions show up quickly, not just in export data, but in currency markets, stock prices, and general business confidence. In fact, the signals began to show almost immediately. After Donald Trump announced the tariff cut to 18%, there was a relief rally in the Indian markets. Stocks moved higher and the rupee looked like it was recovering after consistently

hitting all-time lows in the recent past. Analysts quoted in some news reports noted that even though details of the deal with the U.S. are still vague, but the pause in escalation itself carried weight. That reaction highlights something important. Markets were responding to the removal of pressure more than the promise of future gains. Now, let us compare this with the EU trade deal, which concluded after nearly two decades of negotiations. News reports described it as historic with tariff reductions and market access designed to roll out over time. The structure of the deal was deliberately gradual, which means phased cuts, sector-specific timelines, and long implementation windows.

This is exactly what I explained in last week's episode, to go back and listen if you missed it. So yes, this made the EU deal significant, but also it meant that it could not immediately absorb disruptions elsewhere. Trade flows do not redirect overnight. Supply chains cannot be rewired within weeks. Adding to this urgency was the tone. coming out of Donald Trump's Washington. Reuters in a column noted how US officials had left the door open to expanding tariffs into additional sectors if the talks stalled. And this obviously increased the uncertainty and fear for exporters who were already dealing with higher costs. All of this formed the backdrop to India's decision-making. The EU deal expanded India's long-term

options. But the US situation was shaping day-to-day risk. But what this still does not explain is the shape of the agreement itself. Why do the commitments with US, as we know them so far, look the way they do and why is the balance looking so uneven? Stay tuned to find out. Once you look closely at the commitments, the structure of the deal starts to make sense. This agreement was not designed like a classic free trade pact where both sides gradually lower tariffs and bargain over rules. Instead, what has been described publicly about this deal looks more like a pressure release arrangement built around where India buys, water buys and how closely it aligns.

Like we mentioned earlier, Donald Trump and multiple White House officials have said that India will commit to more than $500 billion in purchases and investments in the US economy. This would include energy, defense equipment, aircrafts, electronics, pharmaceuticals and technology. Now, if you think about it, these are sectors that create long-term contracts, long supply chains, and long political memory. And energy is central here. India has agreed to reduce purchases of Russian oil and shift demand towards suppliers, including the United States.

Trump also spoke about India buying oil from Venezuela, a country whose oil and energy reserves are now tightly controlled by the US. And this detail matters, because oil sources. is not just about markets and commerce. To put it quite bluntly, this means that India's energy security is now more closely tied to Donald Trump's geopolitical whims and fancies. And then there is the issue of market access. U.S. trade representative Jamie Singh-Griar and Carolyn Leavitt, whom you heard earlier, said that India would lower tariffs to zero on a wide range of U.S. goods, calling the access unprecedented for American producers.

Greer, however, later clarified that India would still protect some sensitive agricultural products like sugar and rice, a caveat that Indian media quickly seized on, noting the lack of clarity around which goods are now included and how fast changes would happen. Now, look at what US offered in return. Washington agreed to lower tariffs on Indian goods to 18%. But that figure looked generous only. when separated from context. Multiple news reports repeatedly described the earlier tariff levels,

which had climbed to around 50% as penalty tariffs imposed during a period of escalation. The move to 18% ease the pressure, calm the markets, and kept tariffs firmly in place as a tool for the US. And this difference explains the shape of this deal. On one side, India's commitments are specific and durable. purchases, sourcing decisions and tariff openings that are hard to reverse once implemented. US, on the other side, has made commitments that rely largely on tariff settings that remain adjustable. So, ultimately, this deal goes on to reflect a negotiating dynamic where the US uses

trade access to pursue their broader strategic alignment, not just commercial balance. So, when you look at it this way, the imbalance is not accidental. It is leverage, America having more leverage, at least for the near future. That the US is India's largest export market is an exposure that has been already established. Tariffs made it visible. The agreement that followed reflects that reality, one side offering certainty and the other preserving its own flexibility. And that is why this deal looks the way it does.

That does not mean that the EU deal is irrelevant and it does not turn this into a simple story of winners and losers. Basically, Europe represents where India is headed. And the United States represents where India still has to manage risk. And that is why, even after the mother of all trade deals, this US deal happened the way it did and win it did. If you have any thoughts on this topic, please do write to me at podcast at the ken.com or you can. can also leave comments on our YouTube channel. Thank you for tuning in and we will catch you tomorrow. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news

platform. What you're listening to is just a small sample of a subscriber-only offerings and a full subscription offers daily, long-form feature stories, newsletters and a whole bunch of premium podcasts. To subscribe, head to the Ken.com and click on the red subscribe button on the top of the website. Today's episode was hosted and produced and produced. by my colleague, Snitha Sharma, and edited by Rajiv CN.