What’s Next for India-US Trade Talks? Key Issues and Potential Outcomes

India Sets Trade Boundaries as US Awaits Response

New Delhi: India has established its non-negotiable points regarding agriculture and dairy in the ongoing discussions for a temporary trade agreement with the United States. Sources indicate that the next move lies with Washington to finalize the deal.

If the outstanding issues are resolved, an announcement regarding the interim trade agreement could occur before July 9, coinciding with the conclusion of the 90-day suspension of tariffs imposed by the Trump administration on various countries, including India.

"India has set its boundaries... now it’s up to the US," sources stated.

In February, both nations initiated talks for a bilateral trade agreement (BTA), aiming to complete the first phase by fall (September-October) this year. Prior to that, both parties are focused on finalizing the interim trade deal.

On April 2, the US introduced an additional 26% reciprocal tariff on Indian imports but has temporarily suspended it for 90 days. However, the baseline tariff of 10% remains effective. India is advocating for a complete exemption from this 26% tariff.

"Should the trade negotiations fail, the 26% tariffs will be reinstated," one source warned.

Commerce Minister Piyush Goyal emphasized last week that India will not rush into any trade agreement based on timelines and will only proceed with a deal that is fully negotiated, concluded properly, and serves national interests.

He noted that free trade agreements (FTAs) should benefit both parties and must be mutually advantageous.

"National interest must always take precedence. With that in mind, India is prepared to engage with developed nations if a deal is reached," Goyal remarked on July 4.

The Indian delegation returned from Washington last week after discussions regarding the interim trade agreement. There are also ongoing disagreements concerning tariffs on steel, aluminum (50%), and automobiles (25%).

India has taken a firm stance against granting duty concessions to the US for agricultural and dairy products, as these are sensitive areas. Historically, India has not opened its dairy sector in any previous trade agreements.

Last week, US President Donald Trump announced that his administration is sending letters to an initial group of 10-12 countries, detailing reciprocal tariff rates, with the entire process expected to conclude by July 9.

His remarks come amid rising uncertainty in India regarding the potential for a finalized trade agreement with Washington before the US president's tariff deadline. However, he did not specify which countries were involved.

The president indicated that reciprocal tariffs would take effect starting August 1.

While the US seeks duty concessions in sectors such as certain industrial goods, electric vehicles, wines, petrochemicals, dairy, and agricultural products like apples and tree nuts, India may consider reducing duties in labor-intensive sectors including apparel, textiles, gems and jewelry, leather, plastics, chemicals, oilseeds, shrimp, and horticultural products.

The US has been India's largest trading partner since 2021-22. In the fiscal year 2024-25, bilateral trade in goods reached USD 131.84 billion, comprising USD 86.51 billion in exports and USD 45.33 billion in imports, resulting in a trade surplus of USD 41.18 billion.

India's merchandise exports to the US surged by 21.78% to USD 17.25 billion during April-May of this fiscal year, while imports increased by 25.8% to USD 8.87 billion. The two-way trade in services grew from USD 54.1 billion in 2018 to an estimated USD 70.5 billion in 2024.

India is also a significant market for American businesses in sectors such as professional, scientific, and technical services, manufacturing, and IT. The US accounts for approximately 18% of India's total goods exports and over 6% of imports, contributing to about 11% of bilateral trade.

From April 2000 to March 2025, India attracted USD 70.65 billion in investments, making the US the third-largest investor.

In 2024, India's primary exports to the US included drug formulations and biologicals (USD 8.1 billion), telecom instruments (USD 6.5 billion), precious and semi-precious stones (USD 5.3 billion), petroleum products (USD 4.1 billion), gold and other precious metal jewelry (USD 3.2 billion), ready-made cotton garments (USD 2.8 billion), and iron and steel products (USD 2.7 billion).

Imports from the US included crude oil (USD 4.5 billion), petroleum products (USD 3.6 billion), coal and coke (USD 3.4 billion), cut and polished diamonds (USD 2.6 billion), electric machinery (USD 1.4 billion), aircraft and spacecraft parts (USD 1.3 billion), and gold (USD 1.3 billion).