India-US deal's a great start, but follow-up on the day after is critical

In trade, the day after the deal is the true starting point.

Fresh off concluding its long-pending Free Trade Agreement with the European Union on January 27, New Delhi received a second, strategic boost on February 2, when the United States recalibrated trade terms in what observers hailed as “the biggest victory for US-India relations in nearly a year.”

Together, these back-to-back breakthroughs effectively bookend India’s economic engagement with the West, positioning the country as a leading alternative in the global “China Plus One” strategy.

Negotiations with the EU, formally relaunched in 2022, moved at a brisk pace to deliver what was quickly dubbed the “Mother of All Deals.”

Simultaneously, the agreement with the US, driven by President Donald Trump and Prime Minister Narendra Modi, reversed a year of high-tariff friction. By any measure, this dual-track success is consequential. Yet trade history offers a familiar reminder: the day after the deal is often far more complex than the celebration that precedes it.

Dynamic Protectionism: Look beyond tariffs

The post-deal world is increasingly shaped by dynamic protectionism, where trade is restricted not by tariffs but through non-tariff barriers and the strategic use of courts, parliaments, and sub-national politics to slow or reshape commitments signed. While tariffs may be zero on paper, domestic bureaucracies deploy hyper-specific safety standards, unique labelling requirements, and phytosanitary rules to block imports that are technically “duty-free.”

Yet, when these subtle bureaucratic hurdles aren't enough, governments are increasingly willing to discard the free trade playbook altogether in favour of raw political leverage. The US provides a blunt illustration.

South Korea is case in point

On January, 2026, Washington announced a 25% tariff on advanced computing chips and automobiles. South Korea argues that its FTA protections apply. The U.S. counters that “national security” under Section 232 overrides any trade deal. The Korean trade minister has reportedly been shuttling between Washington offices ever since.

For India, the implication is unavoidable, there is no such thing as guaranteed post-deal tariffs. No such thing as a “free deal”

The deals made by other Asian partners also serve as a warning that preferential access is never "free." Japan and Vietnam offer cautionary contrasts. Tokyo’s July 2025 agreement, trading a 15 per cent tariff cap for a $550 billion investment commitment in U.S. energy, AI, and semiconductor sectors, has ignited domestic backlash over capital flight and the loss of economic autonomy.

Vietnam, meanwhile, faces a 40 per cent U.S. tariff on suspected transhipped goods, forcing a costly overhaul of customs and origin-tracking systems to prove exports are genuinely “Made in Vietnam.” Washington’s decision to lower tariffs on Indian goods to 18 per cent has narrowed Vietnam’s competitive edge, proving that in modern trade diplomacy, preferential access is provisional, closely policed, and constantly contested.

The ghost of EU-trade history 

The FTA’s full legal enforce remains contingent on ratification by the European Parliament and all 27 EU member states. In this provisional phase, EU trade policy enters a fragile middle ground- one that must still navigate Brussels’ notoriously politically charged bureaucracy.

Despite the recent signing of the EU–Mercosur FTA on January 17, 2026, political contest began almost immediately. Within weeks, the European Parliament narrowly voted to refer the deal to the European Court of Justice, after intense lobbying and farmer protests framed as “cars for cows”, opposing cheaper Mercosur beef and poultry in return for expanded EU automobile exports. While provisional application may proceed, ratification is on hold pending judicial review, leaving Mercosur trapped in a political loop disguised as a legal process.

Europe’s political arena is the battleground for non-tariff barriers

The 2016 EU–Canada CETA agreement offers a cautionary parallel, it was nearly derailed by the regional Parliament of Wallonia, Belgium, over farm and labour issues. India’s FTA will face a comparable gauntlet. While the EU as a whole may welcome greater access to India’s labour-intensive exports, regional politics will complicate ratification.

Agriculture, climate, and labour standards will emerge as pressure points, not at the negotiating table, but across Europe’s domestic political arenas.

The EU–China Comprehensive Agreement on Investment (CAI) offers the sharpest warning. After seven years and 35 rounds of negotiations, the CAI was concluded in late 2020, only to slide quietly into political limbo. Sanctions, parliamentary resistance, and shifting geopolitics have turned it into what many now describe as a “zombie agreement”, technically alive, but functionally inert.

The hard work of follow-up

The post-deal phase is often one of administrative trench warfare, endless committee meetings, clarifications, and vigilance to ensure commitments survive domestic politics. Success will depend on how India manages the issues set aside in the rush to conclude, like navigating  EU’s Carbon Border Adjustment Mechanism (CBAM), which can prove to be a double-tax that could erode the FTA’s benefits, for Indian exporters in carbon-intensive sectors like steel and engineering.

Ultimately, the convergence of EU and U.S. agreements reflects a growing confidence in India’s economic credibility and strategic centrality at a moment of global realignment. The real test now lies in disciplined follow-through, navigating regulatory frictions, defending market access, and converting diplomatic momentum into durable commercial outcomes. In trade, the day after the deal is the true starting point.

(Anuj Gupta is the India MD of policy consulting firm BowerGroupAsia.) 

Views are personal and do not represent the stand of this publication.