India awaits US response on interim trade pact proposal
The Indian team returned from Washington last week after holding talks with the US on an interim trade pact. Differences are also there on steel, aluminium (50 per cent) and auto (25 per cent) tariffs.
The onus is now on Washington to complete the proposed interim trade agreement with the US after India established its red lines on important concerns in industries like dairy and agriculture. Before July 9, which is the end of the 90-day suspension period of the Trump tariffs issued on April 2 on dozens of nations, including India, they claimed, an interim trade agreement might be announced if concerns are resolved.
The two nations declared in February that they would begin bilateral trade agreement (BTA) negotiations. They set a timetable of September or October of this year to complete the first tranche, or phase, of the BTA. Prior to that, the two parties are settling on a temporary trade agreement. The United States placed an extra 26% reciprocal duty on Indian imports on April 2; however, it was deferred for ninety days. Nonetheless, America’s baseline tariff of 10% is still in effect. India wants to be completely free from this 26% tariff.
According to the sources, 26% tariffs would be reinstated in the event that the scheduled trade negotiations were unsuccessful. India does not engage into trade agreements based on deadlines, according to Commerce Minister Piyush Goyal, who said last week that the country will only accept the proposed trade agreement with the US if it is properly done, totally finalized, and in the interests of the country. According to him, free trade agreements can only be made when both parties gain from them. “The interests of the nation should always come first. In light of this, Goyal had stated on July 4 that India is always willing to negotiate with industrialized nations if an agreement is reached.
The Indian team returned from Washington last week after holding talks with the US on an interim trade pact. Differences are also there on steel, aluminium (50 per cent) and auto (25 per cent) tariffs. India has hardened its position on giving duty concessions to the US on agriculture and dairy products, as both are sensitive subjects. India has never opened the dairy sector in any of the previous trade pacts signed.
US President Donald Trump last week said his administration is sending letters to the first batch of 10-12 countries, sharing details of reciprocal tariff rates and the entire process could be completed by July 9.
His comments came amid increasing suspense in India on whether New Delhi and Washington would be able to firm up a much-anticipated trade deal before the US president’s tariff deadline ends. He has, however, not named the countries. The president has stated that the reciprocal tariffs would come into effect from August 1.
While the US is looking at duty concessions in sectors like certain industrial goods, automobiles (electric vehicles particularly), wines, petrochemical products, dairy, and agriculture items such as apples, tree nuts, and alfalfa hay; India may look at duty cuts for labour-intensive sectors like apparels, textiles, gems and jewellery, leather, plastics, chemicals, oil seeds, shrimp, and horticulture products.
The US is India’s largest trading partner from 2021-22. During 2024-25, the bilateral trade in goods stood at $131.84 billion ($86.51 billion worth of exports, $45.33 billion of imports and $41.18 billion trade surplus).
India’s merchandise exports to the US rose 21.78 per cent to $17.25 billion in April-May this fiscal year, while imports rose 25.8 per cent to $8.87 billion. The two-way trade in services expanded from $54.1 billion in 2018 to an estimated $70.5 billion in 2024.
India is also a key destination for American businesses such as professional, scientific, and technical services, manufacturing, and IT. The US accounts for about 18 per cent of India’s total goods exports and over 6 per cent in imports and about 11 per cent in bilateral trade.
India received $70.65 billion between April 2000 and March 2025, making Washington the third-largest investor. In 2024, India’s main exports to the US included drug formulations and biologicals ($8.1 billion), telecom instruments ($6.5 billion), precious and semi-precious stones ($5.3 billion), petroleum products ($4.1 billion), gold and other precious metal jewellery ($3.2 billion), ready-made garments of cotton, including accessories ($2.8 billion), and products of iron and steel ($2.7 billion).
Imports included crude oil ($4.5 billion), petroleum products ($3.6 billion), coal, coke ($3.4 billion), cut and polished diamonds ($2.6 billion), electric machinery ($1.4 billion), aircraft, spacecraft and parts ($1.3 billion), and gold ($1.3 billion).
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