India and the United States are in the final stages of negotiating an interim trade agreement, aiming to conclude it before July 8, 2025, to avert the imposition of an additional 26% reciprocal tariff by the US on Indian goods. This tariff, announced by the US on April 2, was suspended for 90 days and is set to take effect from July 9 if no deal is reached. Alongside the suspended 26% tariff, a 10% baseline tariff on Indian goods remains in force.

India’s primary objective in these talks is to secure a full exemption from both the additional 26% tariff and the 10% baseline tariff for its exports to the US. The Indian government is particularly focused on protecting sensitive domestic sectors such as agriculture and dairy, potentially through the use of quotas or minimum import prices (MIP).

At the same time, India is seeking tariff concessions for its labour-intensive industries, including textiles, leather, gems and jewellery, garments, plastics, chemicals, shrimp, oil seeds, grapes, and bananas.

Commerce and Industry Minister Piyush Goyal recently led a high-level delegation to Washington, where he met with US Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick to accelerate the negotiations.

Both sides have expressed optimism, with officials indicating that the interim deal will address goods, non-tariff barriers, and select services such as digital trade. India’s negotiating stance includes pushing for early wins in these areas before finalising a broader bilateral trade agreement (BTA) by September-October 2025, with the long-term goal of doubling bilateral trade to $500 billion by 2030.

On the US side, there is interest in securing greater market access for American products in sectors such as industrial goods, automobiles (especially electric vehicles), wines, petrochemicals, dairy, and certain agricultural products like apples, tree nuts, and genetically modified (GM) crops. However, India maintains regulatory barriers on GM crop imports, though it is open to importing non-GM products such as alfalfa hay.

The US administration requires Congressional approval to lower tariffs below the Most Favoured Nation (MFN) rates, but it retains the authority to remove the reciprocal tariffs it imposed on countries, including India, without Congressional intervention. The urgency stems from the looming deadline, as both countries seek to capitalise on the 90-day tariff suspension window to finalise the interim agreement and prevent a disruption in bilateral trade ties.

India’s trade surplus with the US has been a point of contention, with the surplus reaching $41.18 billion in 2024-25. The US remains India’s largest trading partner, accounting for 18% of its exports and over 10% of its total merchandise trade. The interim deal is seen as a critical step to ease trade tensions, protect key sectors, and lay the groundwork for more comprehensive trade cooperation in the future.

Based On PTI Report