While the India-US interim trade agreement helps restore stability after a period of trade uncertainty and signals closer strategic alignment between the two countries, its real impact will be felt in quieter ways — through how markets adjust on the ground. Here, we look beyond tariff lines to understand how the agreement may play out within India’s agriculture system, where farming, processing, and energy markets are increasingly linked.
Tariff changes under the agreement: Under the interim deal, both countries have agreed to adjust tariffs selectively. India has agreed to reduce or eliminate duties on a range of US industrial, food and agricultural products. These include dried distillers’ grains (DDGs), red sorghum for animal feed, tree nuts, fresh and processed fruits, soybean oil, wine and spirits, among others.
In return, the US has agreed to apply a reciprocal tariff rate of 18% on Indian goods, down from much higher tariffs imposed earlier. These cover textiles, apparel, leather goods, plastics, organic chemicals, home décor items, artisanal products, and certain machinery. The agreement also indicates future duty reductions on select Indian exports such as aircraft parts, pharmaceuticals, and gems and diamonds once it is formally concluded.
These are targeted changes, not a blanket opening of markets. But even limited tariff shifts can have wide effects when they interact with domestic supply chains.
That said, trade today is shaped not just by tariffs, but also by non-tariff measures such as standards, certification and regulatory rules. These determine whether a product can enter a market at all, how easily it can do so, and at what cost. For decades, India has relied on such measures to manage access to its domestic market, especially in sensitive areas such as agriculture and food.
The interim trade framework signals a willingness by both countries to work toward easing some of these barriers for specific products.
What also matters is the order in which this happens. If trade rules are relaxed before domestic systems are ready — such as testing laboratories, traceability systems, or farm-level quality controls — imports that already meet global standards can enter markets quickly, while domestic producers struggle to keep pace. In such cases, openness shifts the adjustment burden onto farmers and processors rather than expanding opportunity.
Where agriculture and energy collide — the soybean case: Soybean offers a clear example of how trade decisions can affect agriculture in unexpected ways. Under the interim framework, India has agreed to reduce or eliminate tariffs on soybean oil. At present, import duties stand at 16.5% on degummed soybean oil and about 35.75% on refined soybean oil.
Soybean sits at the junction of food, feed and fuel markets. It is a joint-product crop — about one-fifth oil and four-fifths meal. Processing decisions depend on both outputs. In recent years, India recorded bumper soybean harvests, yet prices in key mandis fell below MSP, even though Indian soybeans remained competitive internationally.
The problem was not farm productivity, but processing economics. Weak global demand for soybean meal coincided with the rapid domestic expansion of ethanol-linked byproducts such as Distillers Dried Grains with Solubles (DDGS), which increasingly replaced soybean meal in animal feed. As crushing margins weakened, domestic soybean processors reduced purchases from farmers even as edible oil imports continued.
Tariff changes under the interim agreement can add to these pressures. While US soybean oil has usually been costlier than supplies from Argentina, duty removal can reverse this relationship. At present, soybean oil imported from Argentina lands in India at around $1,420 per tonne after duties, while US soybean oil without duty would land closer to $1,250 per tonne. This gap is large enough to shift imports from Argentina to the US.
More strikingly, duty-free US soybean oil could also undercut imported palm oil, which currently lands in India at about $1,380 per tonne after duty, even though soybean oil typically sells at a premium in Indian markets. This reshapes India’s edible oil import mix and weakens the pricing power of traditional palm oil suppliers such as Indonesia and Malaysia.
For domestic agriculture, the outcome is clear: Imported oil limits price recovery, crushing margins weaken further, and soybean farmers bear the adjustment.
Spillovers into maize and ethanol markets: The agreement also affects feed-related inputs such as DDGS. As DDGS becomes more easily available, it can replace soybean meal in animal feed. This changes demand for feed grains such as maize. Maize prices become more dependent on ethanol demand and more unstable when feed demand softens. At the same time, if DDGS supply grows faster than it can be used or exported, ethanol producers themselves may face pressure on margins.
As the two sides move toward formalizing the agreement in March 2026, there is an opportunity to ensure that trade facilitation moves in step with domestic priorities. Ultimately, the gains from trade will depend less on tariff lines and more on the strength of India’s domestic value chains. Deeper processing ecosystems, higher yields in major crops, and sustained investment in quality, logistics and traceability will determine whether Indian farmers and firms can compete on equal terms. Equally important is preserving policy agency, i.e., ensuring that India retains the ability to calibrate trade rules and their implementation as domestic markets evolve.
Trade openness works best when it rests on strong foundations at home. For India, aligning trade policy with agriculture is not about slowing integration, but about shaping it in a way that supports farm incomes, food security and long-term competitiveness.
Shweta Saini and Gopal Sood are with Arcus Policy Research, New Delhi. The views expressed are personal
