New Delhi: Efforts to finalize a limited interim trade agreement between India and the United States have hit a rough patch, with both sides grappling over key demands and facing a tight deadline before steep tariffs may return. The prospects of sealing the deal by August 1 appear slim, according to sources familiar with the ongoing negotiations.
India’s chief trade negotiator Rajesh Agrawal returned to New Delhi this week after holding a fifth round of high-level talks in Washington. While discussions made incremental progress, no substantial breakthrough was achieved. The primary stumbling blocks include Washington’s push for increased access to Indian agricultural and dairy markets, while New Delhi is seeking relief from U.S. tariffs on steel, aluminum, and automobiles.
A U.S. trade delegation is expected to visit India later this month, but time is running out. The Biden-era suspension of Donald Trump’s 2020 tariffs on Indian goods is set to expire on August 1. If a fresh understanding is not reached, Indian exports could face duties of up to 26%, affecting sectors such as gems and jewelry, textiles, seafood, and electronics key pillars of India’s export economy.
Sources suggest that both sides are considering a phased approach postponing divisive issues for now and focusing on a smaller, less controversial agreement that could be finalized by September or October. This stop-gap deal may serve to prevent an immediate tariff shock while buying time for a broader trade pact.
Internally, India faces political resistance to opening its dairy and farm markets to U.S. competition, with strong lobbying from rural stakeholders and domestic producers. On the American side, Treasury Secretary Scott Bessent emphasized a deliberate and careful approach, stating that Washington is not looking to rush into an agreement that could miss the long-term objectives of fair trade.
The India-U.S. trade relationship, currently valued at over $200 billion annually, has been a strategic priority for both nations. Leaders from both countries have previously pledged to double trade by 2030. While optimism remains for an eventual agreement, the immediate risk of a tariff snapback now overshadows the diplomatic gains made over recent years.
With only days left before the August 1 deadline, the path ahead remains uncertain, as negotiators on both sides race against time to avert a potential disruption in bilateral trade flows.