People think trade is about business.
But history shows trade has always been about control.
Whoever controls tariffs controls markets.
Whoever controls food controls nations.
And that is exactly why trade matters more today than ever before.
Trade used to mean simple buying and selling across borders. But in the modern world, it decides who gets access to markets, who controls global supply chains, who dominates food and technology, and who gets to write the rules of the global economy. That is why trade is no longer just business — it is power politics.
Today, tariffs are not just import duties written on paper. They are strategic weapons. They can choke exports, force policy changes, and push countries into deals that serve the interests of stronger economies. And in this global chess game, agriculture has become one of the most sensitive battlegrounds — especially for India.
India’s position is unique. It wants deeper integration with global trade, but it also wants to protect the livelihoods of millions of farmers and small producers. And when global powers use tariffs and market access as tools of influence, India responds not only with retaliation — but with a larger plan: diversify markets, sign FTAs, attract investment, and protect key sectors.
To understand what’s happening today between India, the US, China, and other major players, we must first understand the long history of trade itself.
A Brief History: Trade Has Always Been About Control
Trade taxes are not modern inventions. Even ancient civilizations taxed trade routes to control movement of goods and earn revenue.
In Mesopotamia (17th–18th century BC), traders paid a tax called “Nishatum”, one of the earliest recorded trade duties. Different civilizations later used different forms of tolls and taxes—Pentekoste, Portoria, Shulka—all proving one thing: trade systems have always been structured around power.
But trade became a true political weapon during the colonial era.
In the 1700s, Britain feared cheap and high-quality Indian textiles dominating its markets. So it passed the Calico Acts, banning Indian and Chinese textiles and protecting local industries. This was not about fairness. It was about crushing competition.
In 1721 Britain created an organized “Tariff Schedule,” categorizing goods as essential (low/no tax) and non-essential (high tax). That marked the beginning of systematic protectionism.
When the US introduced the Tariff Act of 1789, it followed the same playbook: protect domestic industries first, even if global trade suffers.
When Tariffs Created a Global Crisis
The biggest warning signal came in 1930.
After the Wall Street crash (1929), the US passed the Smoot-Hawley Tariff Act, raising tariffs on thousands of products. The intention was to save jobs. The result was the opposite: countries retaliated, global trade collapsed, and economic depression deepened worldwide.
The world learned a harsh lesson: uncontrolled tariff wars don’t just affect trade — they destabilize economies.
That’s why, after World War II, nations created a rulebook.
The Rulebook Era: GATT and WTO
In 1947, 23 countries (including India and the US) formed GATT (General Agreement on Tariffs and Trade) to prevent destructive tariff wars and bring predictability into international commerce.
One major principle was the MFN clause (Most Favoured Nation): if you give tariff benefits to one country, you must offer the same to all GATT members, ensuring no discrimination.
But countries still wanted flexibility. So they created a legal exception: FTAs, where two partners can offer each other lower tariffs without extending the same benefits to everyone.
Later, in 1995, WTO replaced GATT with expanded rules, more enforcement, and broader coverage.
India’s Trade Story: Protection Was Not a Choice, It Was Survival
After independence, India followed a highly protective trade policy. Tariffs were kept extremely high — in some sectors even reaching 350% — not out of choice, but out of necessity. India needed to protect domestic industries, safeguard rural employment, and avoid becoming economically dependent on foreign powers.
A major reason India remained cautious about opening its food and agriculture markets came from a bitter historical experience. In 1954, the US launched PL-480, under which wheat was supplied to India. But this wheat was widely seen as low-quality grain, often not fit for human consumption — yet India still had to rely on it during shortages. This created a painful national lesson: food dependency is never just about food; it becomes political leverage.
At one point, during tensions with Pakistan, the US allegedly used this dependency as leverage — pressuring India to stop the war and cutting off food grain supplies. That moment strengthened India’s belief that food security cannot be outsourced.
This experience became part of India’s long-term mindset: India can trade with the world, but it will not surrender control over its food system. That is why even after the 1991 liberalisation, when India sharply reduced tariffs (to nearly 20% by the mid-1990s), agriculture and dairy remained protected red-line sectors.
Why Agriculture and Dairy Remain India’s Red Line
Agriculture is not just a sector in India. It is a livelihood system.
It contributes around 17–18% of India’s GDP, and supports nearly half of India’s population through employment and rural income. For a nation like India, opening agriculture blindly is politically dangerous and economically risky.
India refuses US demands to open agriculture and dairy mainly due to:
- Small farmers vs subsidized imports: US agriculture receives heavy subsidies, making products artificially cheaper.
- Market collapse risk: cheap imports can destroy local farmers and cooperatives.
- Cultural & religious concerns: US dairy practices, cattle feed and hormone usage trigger strong opposition in India.
- Dependency fears: India refuses to repeat the PL 480 style dependency.
- Genetically Modified Crops concerns: not the only reason, but important—cross-pollination, export restrictions and seed control issues.
So while the US treats agriculture as market access, India treats agriculture as sovereignty.
The Trump Era: Trade Turns Into Open Power Politics
The Trump era marked a turning point in global trade. Until then, trade disputes were usually handled through diplomacy, WTO rules, and long negotiations. But under Trump, tariffs became a direct political weapon — loud, aggressive, and designed to force outcomes.
Trump entered office with one clear narrative: the US was “losing” in trade. The US trade deficit had crossed $800 billion, and the largest share came from China — the US-China trade deficit stood at around $375.2 billion. To reduce this deficit, Trump launched a full-scale trade war, especially targeting China with heavy tariffs.
But this strategy created a major shock inside the US itself. China retaliated by cutting imports of American agricultural goods, which badly hit US farmers. US agricultural exports to China fell sharply — from 32.9 million tons (2017) to 8.2 million tons (2018). Since farmers form a politically powerful voting base, the US government had to compensate them with massive support packages totaling nearly $28 billion.
This is where the global power game shifted. Once China stopped buying US farm products, the US needed alternative large markets — and India was an obvious target. The pressure increased: open your agriculture and dairy markets, reduce import barriers, and accept greater access for US farm products.
However, India refused to open its agriculture and dairy markets because doing so could severely harm millions of small farmers, especially in a system where US farm exports remain heavily subsidized. As talks stalled, the US escalated — removing India from the Generalized System of Preference (GSP) and imposing higher tariffs on Indian exports. These tariffs hit major sectors like textiles, garments, footwear, and jewellery, impacting nearly $48 billion worth of shipments.
India did not stay silent. It responded strategically by introducing a Digital Services Tax (DST) on major US tech giants, signaling that if tariffs are used as pressure tools, India will also use policy measures to defend its economic interests.
The 500% Tariff Shock: A Warning Signal India Couldn’t Ignore
Just when India–US trade tensions were already high, a new threat shook exporters and policymakers even more — talk of tariffs as high as 500%. The proposed move, linked to a US sanctions push targeting countries importing Russian oil, would make Indian products practically uncompetitive in the American market — almost like a trade freeze.
Even before such extreme steps, the US had already imposed steep duties on Indian goods, pushing tariffs on several products up to 50%, directly impacting labour-intensive sectors like textiles, garments, footwear and jewellery.
This moment made one thing clear: India could not afford to rely heavily on one market, because tariffs were no longer economic tools — they had become geopolitical pressure tactics.
India’s Big Shift: From Defense to Strategy
Here’s where India’s current approach becomes important.
Instead of depending too much on one market (US, China, or any single bloc), India is trying to diversify.
India’s response is not only about protecting itself from tariffs — it is about becoming a stronger trade player. That’s why India’s strategy now focuses on:
- FTAs to lock in market access
- new export destinations to reduce dependency
- new FDIs by becoming a reliable global supply chain base
- strategic trade alliances instead of one-sided dependency
SOURCE: https://www.indiabudget.gov.in/economicsurvey/doc/Infographics%20English.pdf
The “Mother of All Deals”: India–EU Free Trade Agreement
The newly announced India–European Union Free Trade Agreement (FTA) is being called the “Mother of all trade deals”—because this is not a deal with one country, it is a deal with a bloc of 27 European countries. That single fact makes it historic in scale. The agreement covers not just goods trade, but also services, investment, standards and regulations, intellectual property rights (IPR), sustainability & climate clauses, digital trade, and supply chain cooperation. Negotiations began in 2007 and faced years of delays due to disagreements on sensitive sectors like alcohol, automobiles, agriculture, data protection and IPR, but the deal gained strong momentum after 2021 due to global geopolitical changes and shifting supply chains.
Economically, it connects a combined market of nearly 2 billion people, representing about 25% of global GDP and 30% of global trade. Nearly 90% of tariff lines are expected to be reduced or eliminated in phases over 5–10 years, boosting India’s competitiveness in sectors like textiles, leather, footwear, engineering goods and services, while safeguards and quotas protect sensitive domestic industries.
Conclusion: The Way Forward
The world has entered a phase where trade is no longer just economics — it is geopolitical power. For India, the way forward is clear: protect critical sectors like agriculture and dairy, while expanding globally through smarter FTAs and diversified markets.
Mega deals like the India–EU FTA with a bloc of 27 countries can boost exports, attract FDI, and help India become a key supply-chain hub in the “China+1” shift. To fully benefit, India must strengthen logistics, quality standards, and competitiveness so Indian products can win globally — not just survive tariff shocks.
In the coming decade, India’s trade success will depend on one thing: reducing dependency, increasing resilience, and playing the global trade game strategically.