As India and the United States navigate the complexities of international trade, a critical point of contention has emerged: the imposition of tariffs. With ongoing negotiations for a bilateral trade agreement (BTA), India is seeking assurance from the U.S. that no new tariffs will be levied following the agreement's implementation. This request underscores India's concerns about protecting its economic interests and ensuring a stable trade environment.
The pursuit of a BTA between India and the U.S. has been a topic of discussion for several years, with both countries recognizing the potential benefits of closer economic ties. In February 2025, President Trump and Prime Minister Modi affirmed their commitment to negotiating a "mutually beneficial, multi-sector" BTA, with the goal of increasing market access, reducing tariff and non-tariff barriers, and deepening supply chain integration. The two leaders aimed to more than double bilateral trade to $500 billion by 2030.
However, the path to a comprehensive trade agreement has been fraught with challenges, particularly concerning tariffs. President Trump has been vocal about his perception of India as the "tariff king," citing the country's relatively high tariff rates compared to the U.S. In April 2025, the Trump administration announced new tariffs to address foreign trade practices that it deemed unfair, including a baseline 10% tariff on most U.S. imports and a higher 26% tariff on some partners, including India. While the higher tariffs were temporarily suspended for 90 days, the underlying concerns about tariffs remain.
India's apprehension about new tariffs stems from the potential impact on its exports and overall economic growth. Several sectors, including gems and jewelry, marine products, electronics, and auto parts, are particularly vulnerable to tariff hikes. A report by Motilal Oswal suggested that while tariffs pose challenges, they also present an opportunity for India to focus on self-reliance and boost local production. However, a prolonged tariff war could shrink India's GDP by 0.3 per cent.
During recent trade negotiations, India has sought exemptions from existing U.S. sectoral tariffs on steel and automobiles, as well as proposed duties on pharmaceuticals. India has also threatened reciprocal measures if its concerns are not addressed. At the same time, the U.S. has been pressing India to open its market to genetically-modified crops, relax regulations on medical devices, and ease data localization rules.
Despite these sticking points, both sides have expressed a desire to reach an interim trade deal. India is keen to finalize the text before July 9, when the suspension on reciprocal tariffs is set to expire. Government sources have indicated that India wants a text to be ready before any announcements are made, as the U.S. administration has been known to make announcements without a draft text in place.
As negotiations continue, India's request for assurance against new tariffs highlights the importance of establishing a stable and predictable trade environment. While the U.S. has legitimate concerns about market access and trade barriers, India also needs to safeguard its economic interests and ensure that its exporters are not unfairly disadvantaged. A successful BTA will require both sides to address these concerns and find common ground that promotes mutually beneficial trade relations.
