India and the US are likely closing in on their first trade deal, with a chance for an announcement as early as July. India is seeking full exemption from the 26% "reciprocal" tariffs imposed by the US, which started recently but were put on hold for 90 days.
Strong discussions just took place in Washington, D.C., between India's Commerce and Industry Minister Piyush Goyal and US Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick to pick up where things left off.
Sources close to the talks indicate that consultations are just about complete, with both countries working through the various issues associated with merchandise trade and services.
India's goal in these talks is clear: to receive complete exemption from the 26% duty on select products. The US imposed this tariff on April 2, but a 90-day suspension (to July 9) allowed for an opening for bilateral talks. Even though the 26% additional duty is suspended, the baseline 10% tariff on Indian goods remains, which celebrates India's extension of tariff removal.
It is important to gain preferential treatment for exports coming out of its labor-intensive sectors: textiles, leather goods, gems and jewelry, garments, plastics, chemicals, shrimp, oil seeds, grapes, and bananas. These sectors are essential for India's growth in exports and employment generation.
The US wants tariff reductions on certain industrial products, electric vehicles (including Tesla models), wines, petrochemicals, dairy products, and certain agricultural products (for example, apples and tree nuts).
While India has indicated a willingness to reduce duties on some farm products, it remains careful about the import of genetically modified (GM) crops due to regulations. The non-tariff barriers that American products have faced in the Indian market have routinely been a concern for the US.
The bilateral trade relationship of India (the world's fastest-growing economy) and the US (the world's largest economy) is strong, as evidenced by the US being India's top trading partner for the fourth straight year in 2024-25.
The trading figures are strong at USD 131.84 billion, and India recorded a reduction in merchandise trade surplus at USD 41.18 billion for 2024-25. Of note, the growing merchandise trade deficit with India, especially considering the "America First" trade policies of former President Trump, has been a point of concern for the US.
Both are under a time pressure, with officials determined to announce an interim deal before the end of the 90-day pledge for the tariff suspension on July 9. The intention is to formalize the first leg of the bilateral trade agreement (to be evident by early September-October 2025) with the aspiration to double bilateral trade to USD 500 billion by 2030.
This potential trade deal is viewed as important to strengthen economic ties between these two global economies. The trade deal, part of the "Mission 500" initiative by US President Donald Trump and Indian Prime Minister Narendra Modi, could generate new trade and investment opportunities for economic innovation and supply chain stability.
Other nations will witness these negotiations closely, as both nations are desperately seeking positive outcomes in the global trade environment.