As the July 9th deadline approaches for the potential imposition of reciprocal tariffs, trade negotiations between the United States and India have reached a critical juncture. While both nations aim to finalize an interim trade agreement, significant disagreements persist, particularly concerning agricultural and dairy products.
India has steadfastly maintained its position on key agricultural issues, with Finance Minister Nirmala Sitharaman identifying agriculture and dairy as "big red lines". This stance reflects the government's commitment to protecting the livelihoods of its 700 million farmers and ensuring national food security. India is particularly wary of lowering import duties on subsidized U.S. agricultural exports, including rice, dairy, and genetically modified (GM) soy, as these could potentially overwhelm Indian markets and distort prices.
One major point of contention is the U.S. demand for access to India's dairy market. India's dairy import protocols stipulate that animals cannot be fed with meat, blood, or internal organs of other animals, which effectively prevents U.S. dairy products from entering the market. From the Indian perspective, there are concerns about consuming butter produced from cows that have been fed meat and blood of other cattle. India's dairy sector is largely comprised of smallholders with just a few animals, and opening it to subsidized U.S. imports could devastate their livelihoods.
The U.S. is also seeking to export various subsidized products to India, including apples, almonds, corn, dairy, poultry, and ethanol. The U.S. has expressed dissatisfaction with India's regulations on genetically modified (GM) food, describing them as ambiguous and lacking scientific basis, which impedes American biotechnology exports. India has resisted these demands, citing potential risks to its farmers.
While India is hesitant to make concessions in agriculture, it is seeking lower duties on its labor-intensive exports like textiles and leather. The country is also pressing for a rollback of the proposed 26% U.S. reciprocal tariff and seeking relief from existing U.S. duties on Indian steel and auto parts.
Given these sticking points, analysts suggest that a comprehensive trade agreement by the July 9th deadline is unlikely. Instead, the two countries may opt for a "mini-deal" focusing on tariff reductions and strategic commitments, while leaving broader free trade agreement issues for future negotiation. A limited scope to open up markets exists in ethanol, almonds, apples, raisins, avocados, olive oil, spirits and wines.
The outcome of these trade talks remains uncertain, but India is preparing its industry for the possibility of reciprocal tariffs if an agreement is not reached. Despite the challenges, both sides recognize the potential economic and strategic benefits of a trade deal. The coming days will be crucial in determining whether the U.S. and India can bridge their differences and forge a mutually beneficial path forward.
