The India-US trade deal is facing turbulence as the deadline for the 26% reciprocal tariff on Indian goods looms on July 8, 2025. Despite intensified efforts and several rounds of negotiations, disagreements over key issues persist, casting doubt on the possibility of finalizing an agreement before the deadline.
The US has implemented a 90-day suspension of the 26% reciprocal tariff on Indian goods. This pause has intensified efforts to reach a trade deal before the deadline. Reports indicate the US may be looking at better market access for exports such as oil, defence equipment, soyabean, corn, whisky, and automobiles. These efforts aim to reduce the US trade deficit with India and lower high tariff barriers.
Recent talks in New Delhi between Indian and US negotiators, led by Rajesh Agrawal and senior officials from the United States Trade Representative (USTR), respectively, sought to bridge the gaps. The discussions focused on improving market access, reducing tariff and non-tariff barriers, and strengthening supply chain integration. Both sides aimed to reach a consensus on tariff reductions in sectors like agriculture and automobiles. The US is requesting opening up trade for the agriculture and diary sectors, which could hurt the local farmers in India.
However, significant sticking points remain. The US is pressing for greater access to the Indian agricultural market, including lower duties on American agricultural products like maize and soybean and also market access for genetically-modified (GM) crops, relaxed regulations on medical devices and data localization. Indian authorities are reportedly resisting these demands, fearing adverse impacts on local farmers and expressing health concerns related to genetically modified food.
On the other hand, India is seeking exemptions from US tariffs on steel, automobiles, and pharmaceuticals, and also exception from reciprocal tariffs and other measures. Specifically, India has asked for a revocation of the 10% baseline tariff imposed by the Trump administration under a national emergency. They are also requesting an exemption from Washington's move to impose 50 per cent tariffs on steel. India had also proposed a “zero-for-zero” tariff on US auto parts and steel after US President Donald Trump announced plans to raise the existing 25 per cent tariffs on steel and aluminium imports on May 30.
Given these disagreements, officials suggest that the original deadline of finalizing a deal by early July is unlikely to be met. Instead, both countries are now aiming to finalize an initial "mini-deal" by the fall season, between September and November. This "mini-deal" would involve a limited number of concessions.
Despite the hurdles, both sides remain committed to reaching an agreement. A Bilateral Trade Agreement (BTA) could potentially open new avenues for bilateral commerce and investment. In 2024-25, the US was India's largest trading partner for the fourth consecutive year, with bilateral trade valued at USD 131.84 billion. The two countries have set a bold new goal to increase total bilateral trade to USD 500 billion by 2030.
