India Inc. is finding its American dream deferred as tariff negotiations between India and the United States continue to drag on, creating uncertainty for businesses on both sides. The latest deadline for a trade deal is fast approaching on August 1, 2025, and with the United States having already begun implementing revised reciprocal tariffs on other countries, the pressure is mounting.
Negotiations are ongoing, with a team of Indian negotiators currently in Washington for the fifth round of discussions on a bilateral trade agreement. Both countries initially agreed to the basic framework for talks in March 2025 and aimed to complete the first phase of the deal by September or October. However, sticking points remain, and the path forward is still unclear.
The primary concern for India is securing a favorable tariff rate in comparison to other nations, particularly Indonesia. The US recently finalized a trade agreement with Indonesia that entails a 19% tariff rate. India is aiming for a rate below 20%, potentially even below 10%, seeking a competitive edge over its regional peers.
President Trump has stated the US is eyeing market access into India, similar to the access granted by Indonesia. He has also expressed confidence that the US is close to gaining full trade access to India, suggesting that tariffs are a tool to open markets.
India, however, has resisted opening up its agricultural and dairy sectors, citing cultural concerns and the need to protect its farmers. This has become a major sticking point in the negotiations, though India might offer concessions in other industrial segments. Despite these disagreements, the Indian government has proposed eliminating tariffs on US industrial products, provided the US reciprocates. India has also offered improved market access for select US agricultural products and has suggested increasing its purchases of Boeing Co. aircraft.
As the August 1st deadline looms, India is taking a "wait and watch" approach, preferring to assess the full impact of the US tariffs before formulating a response. A senior government official stated that it is too early to devise a contingency plan without clarity on the scope and impact of the new measures. India is closely monitoring the reciprocal tariffs the US is imposing on other nations to assess the potential impact.
Despite the uncertainty, India's exports to the US have shown strong growth. Data indicates that exports to the US grew by 22.18% during April-June 2025 compared to the same period in 2024. Imports from the US also rose by 11.68% during the same period. This suggests that even with existing tariffs, the US remains a key export destination for India.
A recent report indicates that India is likely to gain a competitive edge in 22 of the top 30 Harmonized System-2 (HS-2) product categories it exports to the US amid the current US tariff framework. Sectors such as nuclear equipment, electronics, vehicles, apparel stand to benefit.
While the long-term implications of the ongoing tariff negotiations remain uncertain, India Inc. is hoping for a resolution that promotes fair trade and unlocks the full potential of the Indian-American economic partnership.
