India and the US Seek Interim Trade Deal to Address Tariff Disputes

New Delhi is in advanced negotiations with Washington to finalize an interim trade agreement before July 8, aiming to resolve ongoing tariff disputes and protect key economic sectors. According to a government official, India is seeking full exemption from the additional 26% tariff on its domestic goods, which was imposed by the U.S. on April 2 but suspended for 90 days until July 9.

The U.S. has maintained a 10% baseline tariff on Indian imports, which India is striving to eliminate in the proposed deal. The government official emphasized that India’s efforts to safeguard its sensitive sectors, including agriculture and dairy, may involve setting minimum import prices or quotas. These measures are intended to ensure that Indian industries can compete fairly in the global market.

Commerce and Industry Minister Piyush Goyal recently visited Washington to bolster trade discussions. During his visit, he met with U.S. Trade Representative Jamieson Greer and U.S. Commerce Secretary Howard Lutnick. The official noted that talks are progressing positively, with the goal of concluding an interim agreement before July 8. This deal would cover key areas such as goods, non-tariff barriers, and services, including digital trade.

India is also seeking concessions for its labor-intensive sectors, such as textiles, leather goods, and garments, in the first phase of the proposed bilateral trade agreement (BTA). Both nations have set a target to more than double bilateral trade to USD 500 billion by 2030, with the first phase of the pact expected to be finalized by September-October 2025.

The U.S. administration has the authority to remove the reciprocal tariffs imposed on India, but it requires approval from Congress to bring tariffs below the most favored nation (MFN) rates. India is hopeful that the U.S. will grant duty exemptions for its key industries, allowing for smoother trade flows and economic growth.

India and the U.S. have agreed to hold chief negotiators’ meetings until May 22, with both sides aiming to leverage the 90-day tariff pause window to advance negotiations. The U.S. has suspended the 26% additional tariffs on India until July 9, a move intended to address the growing trade deficit with India.

India is seeking duty concessions for labor-intensive sectors like textiles, gems and jewelry, leather goods, garments, plastics, chemicals, shrimp, oil seeds, grapes, and bananas in the proposed pact with America. The U.S., on the other hand, is seeking concessions in sectors such as industrial goods, automobiles (particularly electric vehicles), wines, petrochemical products, dairy, and agricultural items like apples, tree nuts, and genetically modified (GM) crops.

While the import of GM crops from the U.S. remains a non-starter in India due to regulatory norms, New Delhi is open to importing non-GM products like alpha alpha hay, a type of cattle feed. The U.S. has repeatedly raised concerns over non-tariff barriers that hinder American goods from entering the Indian market.

India and the U.S. are working to finalize the agreement as early as possible. The U.S. has remained India’s largest trading partner for the fourth consecutive year in 2024-25, with bilateral trade valued at USD 131.84 billion. The U.S. accounts for about 18% of India’s total goods exports, 6.22% in imports, and 10.73% in the country’s total merchandise trade.

India had a trade surplus of USD 41.18 billion in goods with the U.S. in 2024-25, up from USD 35.32 billion in 2023-24, USD 27.7 billion in 2022-23, USD 32.85 billion in 2021-22, and USD 22.73 billion in 2020-21. The U.S. has raised concerns over this widening trade deficit, prompting the need for a comprehensive trade agreement to balance the economic relationship.