Hopes for an interim trade deal between India and the United States ahead of Washington’s looming August 1 tariff deadline appear to be fading, as high-level negotiations remain mired in deadlock over sensitive issues, particularly related to agriculture and market access.
According to two senior Indian government officials quoted by Reuters, efforts to bridge key gaps have faltered, despite sustained dialogue. India’s trade delegation, led by chief negotiator Rajesh Agrawal, recently returned from Washington following the fifth round of discussions without securing a breakthrough. Virtual negotiations are reportedly still ongoing, but time is rapidly running out.
“An interim deal before August 1 looks difficult, though virtual discussions are ongoing,” one official stated. However, a U.S. delegation is expected to visit New Delhi in the coming weeks to further the process, signaling that both sides remain committed to reaching a long-term agreement.
Tariff Deadline and Points of Contention
Earlier this year, U.S. President Donald Trump had threatened to slap a punitive 26% tariff on Indian imports, citing unfair trade practices and market restrictions. Though the administration held off on implementing the tariffs to allow space for negotiations, that pause is scheduled to expire on August 1.
Interestingly, while over 20 countries have already received formal tariff letters from Washington, India has not yet received one, leaving some ambiguity around the immediacy of the threat.
Negotiators are struggling to resolve two primary points of contention:
- India’s reluctance to reduce tariffs or open up its politically sensitive agriculture and dairy sectors, which are tightly linked to domestic livelihoods and food security.
- The United States’ resistance to India’s demand for relief from existing high tariffs on Indian exports such as steel, aluminium, and automobiles.
A second Indian official noted that negotiators are exploring whether some of these contentious items can be set aside temporarily to reach an interim agreement on less controversial areas — essentially deferring the thorniest issues to future discussions.
Concerns Over Sectoral Impact
Trade analysts warn that failure to secure a deal could have near-term economic consequences. Ajay Sahai, Director General of the Federation of Indian Export Organisations (FIEO), said key Indian export sectors — particularly gems and jewellery — may suffer if the 26% tariffs are enforced.
“That said, the impact may be temporary,” Sahai added. “Both countries are keen on a long-term agreement, and talks are likely to continue even if the interim deadline passes.”
US Perspective: Emphasis on Quality Over Speed
US Treasury Secretary Scott Bessent, in an interview with CNBC, emphasized that the Trump administration prioritizes the quality of trade deals over the speed of their execution. When asked whether the tariff deadline might be extended for countries still in active negotiations, he said such a decision would rest with President Trump.
The administration, he noted, is evaluating each negotiation on its merit.
Larger Deal Still Possible by September–October
Despite the current impasse, Indian officials remain cautiously optimistic. One senior official pointed out that Prime Minister Narendra Modi and President Trump had, in February, reached a broad understanding on the contours of a future deal, aiming for a more comprehensive pact by September or October 2025.
“Given that there have been five rounds of negotiations and another U.S. delegation is expected, we remain optimistic about finalising a trade pact,” a third government source affirmed.
Meanwhile, in a recent update to Parliament, Minister of State for Commerce and Industry Jitin Prasada stated that five formal rounds of negotiations have taken place between India and the U.S., with the latest round held in Washington from July 14 to 18, 2025.
Prasada also informed Parliament that India is simultaneously engaged in trade negotiations with the European Union, with the 12th round of talks on a proposed Free Trade Agreement (FTA) recently concluded in Brussels from July 7 to 11, 2025.
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