India–America: Prospects for an Interim Trade Agreement
By Dr. Jayantilal Bhandari
Currently, India and the United States are moving toward an interim trade agreement. Finalizing trade talks by June aligns with India’s interests, especially given President Trump's fluctuating tariff strategies. After imposing heavy tariffs on China, Trump signed an agreement on June 11 to end the US-China trade war, allowing the US access to rare minerals and educational exchange, while strengthening domestic tariff enforcement via a favorable federal court decision.
US Commerce Secretary Howard Lutnick has stated that the India-US interim trade agreement may conclude by June. Commerce Minister Piyush Goyal has affirmed the positive direction of the discussions. Notably, the Manhattan International Trade Court recently declared Trump's retaliatory tariffs illegal, adding momentum to the negotiations.
Three key developments underline the importance of this trade growth:
- An interim deal could be announced by June 25, 2025.
- India will partially open government procurement markets to foreign companies, including American firms.
- India remains a lucrative destination for American corporations, with Apple planning further investments despite tariff threats.
Piyush Goyal, during his Washington visit, reviewed the first phase of the bilateral trade proposal with Secretary Lutnick. The US had imposed a 26% reciprocal tariff on Indian goods on April 2, but it was suspended until July 9. Signing an interim agreement before July 8 could help resolve tariff disputes and boost bilateral trade cooperation.
To achieve zero tariffs on Indian goods in the US, India may reduce duties on select American items. However, India insists on only allowing non-GMO agricultural imports and excluding sensitive sectors like dairy. India seeks low or zero tariffs on labor-intensive sectors to boost exports and employment. The US, in return, seeks lower tariffs on electric vehicles, wine, ethanol, industrial goods, and quality control relaxations.
US Treasury Secretary Scott Besant recently noted that India is closest to completing a bilateral trade agreement with the US, potentially by December 31, 2025. During PM Modi and President Trump's February 13 meeting at the White House, both nations agreed on reducing the US trade deficit and boosting energy and defense trade. A bilateral trade target of $500 billion by 2030 was also established, along with joint efforts toward the India-Middle East-Europe Economic Corridor (IMEC).
Despite President Trump’s occasional unpredictability, the interim trade agreement in June and the BTA by December 2025 are expected to accelerate trade. India remained the US's largest trading partner in FY 2024–25, with bilateral trade reaching $131.84 billion. Exports to the US grew by 11.6% to $86.51 billion, and imports rose to $45.33 billion, giving India a trade surplus of $41.18 billion.
India’s recent FTA with the UK sets a precedent for potential agreements with the US, EU, Oman, Canada, South Africa, and Gulf countries. The interim trade deal with the US could serve as a milestone toward the $500 billion bilateral trade goal by 2030, boosting exports and generating large-scale employment.