India-US Trade Deal

Context:

India is negotiating with the U.S. to avoid getting hit by new, high tariffs being imposed across Asia as part of Donald Trump’s aggressive trade reset. Several Asian nations like Vietnam, Myanmar, Laos, and Philippines have already been impacted, with tariffs going up to 40%.

India has managed to get a 90-day exemption, but this will expire on August 1, 2025. Without a deal, Indian exporters will be subject to similar high duties.

What are the major sticking points?

Genetically Modified (GM) Crops: U.S. wants India to open its market to GM agricultural imports. India has firmly opposed, citing:
- Risks to native seed biodiversity
- Opposition from farmers' groups and Parliament
- Potential loss of exports to GM-free nations
Dairy Imports: Indian religious sensitivities are at play. U.S. cattle often fed animal byproducts, which goes against Indian cultural norms. India sees this as a non-negotiable red line.
Pharmaceutical Regulations: U.S. pharmaceutical firms are unhappy with India’s pricing caps and patent regulations. India defends this as essential for affordable healthcare and public welfare.
Agriculture and Non-Tariff Barriers: U.S. wants India to relax sanitary and phytosanitary rules that it says block U.S. exports unfairly. India insists these are necessary for consumer safety and domestic producer protection.
BRICS:BRICS membership (with China, Russia, Brazil, South Africa) may trigger additional tariffs. The U.S. sees BRICS as a challenge to its financial dominance. India, meanwhile, is balancing strategic autonomy while preserving its ties with the West.

Why is this interim deal important?

Avoids Immediate Tariff Shock: The S. under Trump has begun slapping steep tariffs on most trading partners. India, unlike others, may not receive any formal tariff hike notice this week, showing it has some breathing room due to active negotiations.
Gives Time for a Broader Agreement: This interim deal is not final—it will act as a stop-gap arrangement, allowing time to settle larger unresolved issues before a comprehensive trade deal later this year.
Boosts Bilateral Trust: Trump recently told the media that a deal with India is “closer”, signaling political will. If successful, India would join a small club of countries (like the UK) that have made bilateral trade arrangements with the Trump administration.
Tariffs on Indian Exports: India has a USD 40 billion trade surplus with the U.S., making it a top target.

Fact Box: India-US Trade

India's largest trading partner is the US.
In FY24, the bilateral trade between India and the US stood at a record USD 118.2 billion as against USD 128.78 billion in FY22.
In FY24, India had a trade surplus of USD 36.8 billion with the US.
USA is the 3rd largest investor in India with cumulative FDI inflows of USD 67.76 billion from April 2000-September 2024.
India's major exports to the US include engineering goods, electronic goods, gems and jewellery, pharmaceutical products, light crude oil and petroleum, electrical, and others.