Donald Trump's tariff deadline looms as India-US trade deal faces hurdles

Disagreements on import duties for auto components, steel, and farm goods have stalled trade talks between India and the US.

The disagreements jeopardise hopes for a deal before US President Donald Trump's July 9 deadline for reciprocal tariffs, according to a Reuters report on Thursday. 

This stalemate represents a significant departure from the previous optimism, which stemmed from Trump's assertion that New Delhi had offered a "no tariffs" deal for American products, and suggestions from officials on both sides that India might be one of the first nations to reach an agreement on the new US tariffs.

Roadblocks

Indian government officials informed Reuters that the US has yet to agree to India's demands for concessions on existing tariffs on steel and auto parts, and a rollback of the proposed 26% reciprocal tariff scheduled for July 9.

"The U.S. side first wants India to commit to deeper import tariff cuts on farm goods like soybeans and corn, cars and alcoholic beverages along with easing of non-tariff barriers," a source was quoted as saying in the report. 

An Indian delegation is anticipated to visit Washington ahead of the deadline, the report revealed. However, discussions might now prioritise a comprehensive agreement over a hastily arranged interim deal.

India, under Prime Minister Narendra Modi, is actively working to establish itself as a vital US ally. This effort includes attracting American companies such as Apple, which is part of a broader strategy to diversify supply chains away from China.

However, trade negotiations have faced difficulties in advancing.

The first source indicated India’s keenness, but not desperation, to finalise a deal before the July 9 deadline. 

According to the source, India had offered tariff reductions on almonds, pistachios, and walnuts, and was prepared to extend preferential treatment for American imports in sectors such as energy, autos, and defence.

However, sources indicated that a direct intervention by Modi and Trump could still lead to a last-minute breakthrough.

Partnership

Indian officials emphasised a lasting commitment to the US as a reliable economic ally, even as they assert policy independence despite the current stalemate.

In February, Modi and Trump had reached an agreement to finalise the initial stage of a bilateral trade deal by autumn 2025. 

They also set a goal to increase trade from approximately $191 billion in 2024 to $500 billion by 2030.

India is also actively pursuing free trade agreements (FTAs) to mitigate potential policy changes under a Trump administration in the US. 

This includes ongoing discussions with the European Union for a pact expected later this year, and recently concluded negotiations for an FTA with the United Kingdom.

Ram Singh, head of the Indian Institute of Foreign Trade, a government funded think-tank, was quoted in the report:

Should a worst-case scenario unfold, India is positioned to absorb the impact of reciprocal tariffs, the report said. This is due to its sustained tariff advantage when compared to rivals such as Vietnam and China.

US tariff hikes averaging 10% in early April appear to have had a limited impact, as India's exports to the US increased to $17.25 billion in April-May from $14.17 billion a year earlier.