The unmatched cricket umpire Harold “Dickie” Bird once said of Bomber Wells, a spin bowler who batted at No. 11 because it was not possible to bat any lower, that he was so poor at running between the wickets that, “when he shouts ‘YES’ for a run, it is merely the basis for further negotiations”. (The Pavilion End). The line is funny, but it captures the essence of what I am about to say.
Quickly, and somewhat curiously, on the heels of India and the European Union (EU) signing what has been described as “the mother of all trade deals”, US President Donald Trump took to social media to announce a trade “deal” with India. Details, as is the norm, will follow. For the moment, here is what is publicly known.
The United States has reduced its total tariff on Indian goods from 50 per cent to 18 per cent. This includes removing the punitive 25 per cent tariff imposed in August 2025 in response to India’s purchases of Russian oil, and lowering the baseline reciprocal tariff from 25 per cent to 18 per cent. In return, India has reportedly committed to stop purchasing Russian oil, and instead source oil from the United States and potentially Venezuela. India has also pledged to reduce tariffs and non-tariff barriers on American goods “to zero”, and committed to purchasing over $500 billion worth of US energy, technology, agricultural products and coal, although no timeline has been specified.
The headline question is simple: How seriously should we take this announcement? Especially when it comes from a President who has been single-handedly responsible for inflicting irreparable damage on the rules-based trading system, painstakingly constructed after World War II. This is not to dismiss the deal outright. Any easing of tariffs and restoration of predictability is good news. Thousands of hours of negotiations and patient diplomacy have clearly taken place, and these efforts will bear fruit as goods and services continue to flow. As long as commerce proceeds on the new agreed terms, exporters will rejoice. The US remains India’s most important single-country trading partner, particularly once services are included.
Engagement with the US today, however, comes with a statutory warning. Backsliding is a strong possibility. Several countries and individuals have discovered this the hard way. The EU has oscillated between being a strategic partner and being a target. Elon Musk learnt that proximity offers no immunity. No deal, however grandly announced, is safe from the impulses of a President with a demonstrated disdain for rules-based trade.
This is not how institutions are meant to function. And that points to a deeper contemporary problem. Much of what is taught in Economics, and much of what underpins modern growth theory, rests on a simple proposition that institutions matter. Stable rules, credible commitments and constraints on executive discretion reduce uncertainty and encourage investment. The Anglo-Saxon economic model has long been held up as the exemplar of this logic. Its antithesis is now on display. Trade policy can be rewritten by executive fiat, deals announced on social media and market access made conditional on geopolitical alignment. In such a world, hedging and diversification are prudent choices.
In an earlier piece on the India–EU trade agreement (‘FTA not an endpoint, marks reform push for next strategic move’, IE, 28 January), I had invoked the Mundell–Fleming framework to describe India’s emerging trilemma. India cannot simultaneously maintain unshackled access to Russian oil, preserve complete strategic autonomy, and deepen trade integration with the United States. Something had to give. The EU deal appears to have eased one constraint by opening European markets more substantially, thereby reducing overdependence on the high-income American consumer. Europe is admittedly fractious and often frustrating, as exporters readily testify. But it also respects institutions, remains far more rule-based, and is significantly less prone to unilateral economic measures. For India, the deal represents a conscious trade-off: Accepting regulatory friction and long negotiations in return for predictability. In trilemma terms, India voted in favour of institutional reliability.
This is precisely the logic that Daron Acemoglu, who received the Nobel Prize in Economics in 2024, has long advanced. His work emphasises that good institutions are fundamental to long-term economic development. The resultant policy prescription is clear: Build robust institutions and prosperity will follow. More than three decades ago, in 1992, Jagdish Bhagwati warned the US against aggressive unilateralism and the damage it could inflict on the global trading system. That warning now appears strikingly prophetic.
India’s course is therefore clear. Engage with the US, accept respite when it is offered. But maintain and deepen relationships with other major economies. As the Union Budget presented last Sunday underscored, India must promote and expand labour-intensive manufacturing, especially after the damage inflicted by the 50 per cent US tariff. Textiles and apparel, gems and jewellery face intense competition from Bangladesh and Vietnam, whose lower-duty access to American markets has placed Indian exporters at a disadvantage. The recently announced removal of punitive tariffs and reduction of reciprocal tariffs will help level the playing field somewhat.
At the same time, continued investment in the EU relationship is essential because it provides critical diversification. In the words of P G Wodehouse, relationships need “tending, nurturing, and assiduous fostering.” For India and the EU alike, that is sound advice.
The writer is dean, School of Humanities and Social Sciences, Shiv Nadar University, and professor of Economics. Views are personal
India’s course is therefore clear. Engage with the US, accept respite when it is offered. But maintain and deepen relationships with other major economies. 
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