The chances of a mini interim trade deal between India and the US before the August 1 deadline looked bright as negotiators from both sides wrapped up the fifth round of talks in Washington late last week.
While the discussions were focused on the first tranche of a bilateral trade agreement (BTA) for which the target is fall of the year, whatever progress achieved in the negotiations so far could be packaged as an interim agreement, sources said, after the Indian team of negotiators led by special secretary Rajesh Agrawal returned to India. Such a deal is crucial for reducing the extent of reciprocal tariffs that Indian exports could face in the US after August 1.
Talks cover high-tech trade
The latest round of talks from July 14-17, sources said, went beyond regular trade issues, as discussions were also held on ‘high-technology trade’, including the digital economy.
An exemption from additional 25% duties on the auto sector and 50% on steel and aluminium have also been sought from the US.
The current round of negotiations between India and US also opened on SCOMET (Special Chemicals, Organisms, Materials, Equipment, and Technologies). These are high technology items that can also be used for military purposes. The trade of these goods is highly regulated and happens only with trusted partners.
A statement on February 13 after a meeting of Trump and Prime Minister Narendra Modi had dwelt extensively on this trade. The statement had talked of both governments redoubling efforts to address export controls, enhance high technology commerce, and reduce barriers to technology transfer between the two countries, while addressing technology security.
Tariffs, agriculture and market access at the core of negotiations
Apart from lower additional tariffs, India is also seeking to maintain adequate safeguards for its farm sector as the US pushes for greater access in the agriculture market. Along with duty cuts in the farm sector, the US also wants India to allow entry of genetically modified agricultural products in India. It also wants India to lower duties on automobiles and buy more energy products.
While protecting its farmers’ interests, especially in the dairy sector and for cereals such as wheat and rice, India has sought greater market access for its labour intensive and emerging sectors of manufacturing, such as electronics. Apart from goods trade, the other objective of the US in these negotiations is to get a more liberal regulatory climate for its technology companies in India.
President Donald Trump had announced 26% reciprocal tariffs on India on April 2 and then put on hold its implementation till July 9. Just before the said date, the deadline for implementation of reciprocal tariffs was pushed to August 1 to give more time to the US to strike deals with its trade partners. So far, the US has announced trade deals with the UK, Indonesia and Vietnam.
The announcements on the deals with Vietnam and Indonesia have been made by Trump without formal texts. Officials in Indonesia said details of the deal are still being negotiated and Jakarta is still seeking exemptions for palm oil and nickel exports. The Vietnam deal was announced on July 2 and Vietnamese officials now say they are still working on the terms of the deal.
Besides the deals, Trump has unilaterally announced higher tariffs on 24 countries and the European Union (EU) through public letters to their leaders imposing tariffs as high as 50% on Brazil.
The strategic partnership between the India and the US is also guiding the approach in the talks. The trade deal may be sweetened, with India purchasing more defence equipment from the US. The US remains the biggest market for India’s exports and the only major economy with which it enjoys a trade surplus. In FY2025, trade between India and the US reached $186 billion as per commerce ministry data. India exported $86.5 billion in goods to the US, while importing $45.3 billion, creating a goods trade surplus of $41 billion. In services, India exported an estimated $28.7 billion and imported $25.5 billion, adding a $3.2 billion surplus. Altogether, India ran a total trade surplus of about $44.4 billion with the US.