India is currently engaged in intense trade negotiations with the United States, aiming to finalize an interim agreement by July 9, 2025, to avoid potentially higher tariffs on Indian exports. As the deadline approaches, the pressure to strike a deal is mounting, with the US pushing for greater access to India's agricultural and dairy markets, a long-standing point of contention. Simultaneously, India is seeking meaningful tariff concessions on its labor-intensive exports, such as garments, footwear, and leather.
According to Swaminathan Aiyar, India should not cave into Trump's demands. He suggests that India should stand firm in trade negotiations, drawing parallels with Japan and Europe. Aiyar has also critiqued India's decision to forgo the Google tax.
The US has long sought greater access to India's agriculture and dairy sectors, including the import of genetically modified (GM) crops and cow milk. These demands have consistently met with resistance from India due to concerns about rural livelihoods, food safety, and the potential impact on its farmers, who often have small land holdings and practice sustenance farming. India's dairy sector, in particular, is sensitive due to cultural and economic factors. Granting access to US dairy products could negatively impact local producers.
On the other hand, India is pushing for the removal of reciprocal tariffs imposed by the US and for tariff concessions on its exports. Key sectors for India include textiles, garments, gems and jewelry, leather goods, plastics, chemicals, shrimp, oilseeds, grapes, and bananas. These sectors are crucial for job creation in India, and access to the US market is vital for their growth. India aims to secure broader tariff cuts, especially on high-employment goods, to achieve its goal of doubling bilateral trade to $500 billion by 2030.
The outcome of these negotiations will have significant implications for both countries. A successful deal could boost bilateral trade, improve export opportunities for Indian industries, and enhance investor confidence. Eliminating tariffs on key exports like IT services, pharmaceuticals, textiles, electronics, and auto components would directly benefit these sectors. Furthermore, clearing up trade uncertainty could attract foreign institutional investors (FIIs) and uplift overall market sentiment.
However, failing to reach an agreement could result in Indian exports to the US facing tariffs as high as 26%, which would negatively impact various sectors. The US "reciprocal tariffs," including 26% on all imports from India, will take effect on July 9 if there is no agreement.
Despite the ongoing disagreements, both sides appear motivated to reach a resolution. President Trump has indicated the possibility of a deal with India soon, and Indian officials have extended their stay in Washington to continue negotiations. However, experts caution that a full agreement is expected to be a protracted, multi-phase process, likely spanning two to three years of consistent negotiations. In the immediate term, both countries may focus on "quick, easy wins" such as lowering tariffs in non-sensitive sectors and increasing purchases of oil, gas, and defense equipment, while postponing negotiations on sensitive sectors like agriculture.
India has been actively pursuing free trade agreements (FTAs) with various countries and regions, including the UK and the European Union. The FTA with the UK, finalized in May 2025, grants Indian businesses nearly tariff-free access to British markets and benefits from the UK's commitments in service sectors. Negotiations with the EU are ongoing, with both sides aiming to conclude an FTA by the end of 2025. These efforts reflect India's broader strategy to strengthen its trade partnerships and enhance its role in the global economy.
