India-US trade deal negotiations are progressing "fantastic[ally]," according to Indian Commerce Minister Piyush Goyal, who expressed optimism about concluding a significant partnership despite the approaching US tariff deadline on August 1.

Both countries aim to finalise a mini or interim trade agreement before this deadline, but key challenges remain, principally India's refusal to open its politically sensitive agriculture and dairy sectors, which has been a consistent stance in India's trade policies.

India is seeking preferential market access in the US compared to its competitors and expects "special and preferred treatment" from the US, citing that India was the first country to start negotiations. Goyal emphasised a balanced agreement that benefits both sides over strict adherence to deadlines or comprehensive deals, suggesting flexibility for smaller sectoral achievements.

The US is pushing for greater access to India's agriculture and dairy markets, including tariff cuts on products like genetically modified crops (corn, soybeans), dairy, apples, almonds, and ethanol. The US approach includes raising the baseline reciprocal tariff rate from 10% to 15%, with President Trump indicating tariffs could range from 15% to 50% depending on the country. India currently imposes high tariffs on US farm imports (average 38%), while US tariffs on Indian agricultural products remain low (around 5.3%).

India's agriculture sector supports over 700 million people, including 80 million smallholder dairy farmers, making the sector politically and economically sensitive. Hence, India resists tariff reductions on dairy, rice, wheat, and GM crops to protect livelihoods and food security. This protects Indian farmers but complicates trade negotiations significantly.

In the broader trade context, India is also seeking tariff relief on US levies for steel, aluminium, and automotive parts, where tariffs have increased recently (e.g., steel tariffs rose from 25% to 50%). Other issues delaying an agreement include US demands for greater digital market access for American tech firms and concerns over India's data localisation and intellectual property rules.

Although India has not received a formal tariff notice from the US as of late July, unlike over 20 other countries that have already been notified, the likelihood of an interim trade deal before the August 1 deadline appears low due to these deadlocks.

President Trump has suggested that a trade deal with India is "near," and US officials are expected to visit India in the second half of August for further talks, with hopes for a phased agreement by the fall.

Agencies