The United States and India are in advanced discussions to finalise an interim trade agreement that could see proposed US tariffs on Indian goods set below 20%, a significant reduction from the 26% initially proposed and a notably more favourable rate compared to other Asian countries.

This development positions India advantageously, as neighbouring nations such as Vietnam and the Philippines face tariffs of 20%, while Laos and Myanmar have been hit with rates as high as 40% to 50%.

Unlike many countries that recently received formal tariff demand letters from the Trump administration ahead of an August 1 deadline, India is not expected to receive such a notice. Instead, the interim deal is likely to be announced via a joint statement, reflecting the private and ongoing nature of the negotiations. This arrangement is designed to provide both sides with the flexibility to continue talks and resolve outstanding issues before a broader, more comprehensive agreement anticipated later this year.

The interim deal is expected to set a baseline tariff below 20%, with language allowing for further adjustments as negotiations progress. This would make India one of a select few countries—alongside the UK and Vietnam—to secure a trade pact with the US under President Trump’s current tariff regime. Notably, Vietnam was surprised by its 20% tariff rate and is still seeking to reduce it, highlighting the relative advantage India is negotiating.

Key sticking points in the talks remain, particularly around US demands for India to open its market to genetically modified crops—an issue New Delhi has resisted due to concerns for its farmers. Other unresolved matters include non-tariff barriers in agriculture and regulatory processes in the pharmaceutical sector.

President Trump has publicly stated his intention to impose blanket tariffs of 15% to 20% on most trading partners who have not been notified of their rates, with a global baseline of 10%. However, the proposed India deal would see tariffs capped below 20%, sparing India from the sweeping hikes imposed on many others.

If finalised, this interim agreement would allow India time and space to address remaining contentious issues while providing a measure of certainty and relief from the escalating global tariff environment. The exact timing of the announcement remains uncertain, as both sides continue to negotiate the finer points of the deal.

Agencies