On the face of it, the prospects for sealing a bilateral trade with the US, after five rounds of negotiations, do appear propitious. President Donald Trump, who has been signalling that it is imminent, is in regular touch with Prime Minister Narendra Modi. A team from Washington led by Deputy US Trade Representative Rick Switzer was in New Delhi to assess progress. Switzer’s boss, Jamieson Greer, has indicated that India has given its best offer for a deal. Commerce and Industry Minister Piyush Goyal rightly responded that if they are happy, they should be signing on the dotted line. Alas, this is not happening.
The time frames are only extending, with the government’s chief economic advisor stating that it is likely by March 2026. The warrant for scepticism is that scarcely a day passes without fresh developments that make it highly uncertain. Responding to pressure from the US farm lobby, Trump has threatened fresh tariffs on Indian premium basmati rice, citing concerns over dumping. Mexico has also slapped tariffs of 5% to 50% on various Asian countries, including India, possibly at the US’s urging. All these developments add a layer of uncertainty to the putative trade deal, which according to observers is mostly done and awaits Trump’s nod.
Two-Track Strategy
Talks have progressed well at the negotiator level, and the issues left to be discussed are now few in number. Why then is the deadline shifting from autumn to the future amidst indications that the negotiation process is progressing on two parallel tracks according to India’s commerce secretary, Rajesh Agrawal? The first track is to secure a framework trade deal that addresses the reciprocal tariff challenge that Indian exporters currently face—hopefully by the end of this year—that will feed into the second track of the longer-term interim bilateral trade agreement being negotiated. The US President has slapped a 25% reciprocal tariff on India’s goods to the US plus an additional penalty of 25% for purchases of Russian oil that funds its war in Ukraine. India is focused on getting the US to first roll back the tariffs of 50% to much lower levels—below the 19-20% for competitors like Vietnam, Indonesia, and Bangladesh—and then fleshing out a mutually beneficial interim trade deal.
Holding Firm
Given the various imponderables—including dealing with a highly unpredictable US President—India’s stance on the Indo-US trade deal has been pragmatic. Goyal has stated that a deal is done when both sides stand to benefit and that we should never negotiate with deadlines or hard stops. India, for its part, is significantly reducing its reliance on Russian oil and stepping up purchases from the US. Given its relatively low per capita income, India realises that it still needs to keep reasonable levies even as it is willing to lower the overall level of its tariffs under US pressure.
India has been willing to accommodate the US’s requests on specific industrial commodities but has held firm on its agricultural red lines—especially lowering duties on genetically modified maize and soya bean which are not allowed under our regulations. Greer told the US Senate Appropriations Committee that India has been quite forward-leaning but a “tough nut to crack”. Even if the time frames are extending, India needs to hold firm and safeguard its national interests rather than succumb to US pressure to clinch a one-sided trade deal.