India and the United States are currently engaged in high-stakes negotiations aimed at finalising an interim trade agreement ahead of a looming deadline on July 9, according to official sources familiar with the matter.
The urgency stems from the suspension of a steep 26% reciprocal tariff imposed by the US on Indian goods on April 2, which is set to be reactivated if the two sides fail to reach a deal before the agreed deadline.
The Stakes: A Narrow Window to Avoid Heavy Tariffs
The US had originally announced the 26% additional tariff on select Indian products earlier this year, citing trade imbalances and market access concerns.
However, in what many analysts view as a diplomatic gesture to allow room for negotiations, the Trump administration temporarily suspended the tariff for 90 days, ending July 9.
Despite this suspension, a baseline tariff of 10% continues to apply, adding pressure on both economies—particularly India—to arrive at a workable solution.
“Both countries are keen, both are engaged, and both are making an effort. But the outcome has to be mutually beneficial,” said one source.
The official further noted that while the talks are constructive, trade agreements always involve complex and often contentious sectors, which make consensus difficult to reach quickly.
Key Flashpoints: Dairy, Agriculture, Automobiles
Among the most contentious issues are those related to agriculture and dairy, which remain deeply sensitive sectors for India.
“India has never opened its dairy sector in any free trade agreement so far, and it continues to be a difficult area,” the source said.
On the American side, Washington is seeking lower tariffs and wider market access for a range of products, including:
- Industrial goods
- Automobiles, particularly electric vehicles
- Petrochemicals
- Wines and alcoholic beverages
- Dairy products
- Agricultural commodities like apples, tree nuts, and even genetically modified crops
In return, India is pushing hard for tariff relief on labour-intensive exports, which are critical for employment and economic growth. These include:
- Textiles and garments
- Gems and jewellery
- Leather products
- Plastic goods
- Chemicals
- Marine exports such as shrimp
- Agricultural items like bananas, grapes, oil seeds
A Race Against Time
With the July 9 deadline fast approaching, both countries face mounting pressure. Should the interim deal fail to materialise, the US is expected to reinstate the suspended 26% tariff, which could significantly disrupt trade flows and increase costs for Indian exporters.
Sources added that if the suspension ends without a deal, India may still manage to secure some advantages in certain sectors, but overall could face greater losses compared to other trading nations.
Similarly, the US is also likely to face negative repercussions, as higher tariffs would impact American importers and consumers who rely on Indian goods.
Future Rounds: Talks to Continue Virtually and In-Person
Though both nations are striving to meet the July 9 timeline, sources suggest that some aspects of the agreement may take longer, with a secondary target date set for September–October (the fall) to conclude the first formal phase of the broader trade framework.
The next round of discussions may involve an Indian delegation visiting the United States to continue the talks in person. No official dates have been finalised for this visit yet.
The most recent round of face-to-face talks occurred between June 5 and 11, when a US negotiating team was in India. Officials confirmed that the dialogue would continue in hybrid mode—both physically and virtually—in the coming weeks.
Uncertain Road Ahead
As of now, there is no clarity on whether the tariff suspension will be extended beyond July 9 if the agreement isn’t ready in time. Trade watchers and economists are closely monitoring developments, as the outcome will have broad implications for Indo-US economic relations, sectoral trade dynamics, and global supply chains.
What remains clear is that both India and the United States have significant incentives to reach common ground. But with complex domestic interests, high-stakes political optics, and sensitive economic sectors involved, the road to a conclusive interim trade deal is anything but straightforward.
