India and the United States (US) are eager to conclude a trade deal, and have been in intense negotiations to find an agreement by September-November, but some issues remain intractable. India has already given a number of tariff concessions to the US, but the US is seeking concessions that India finds hard to give.
Indo-US trade
The US is India’s largest trading partner. In 2024-25, bilateral trade was valued at US$ 131.84 billion, according to the Indian Ministry of Commerce.
In the last fiscal year, India’s exports to the US rose by 11.6 percent to US$ 86.51 billion as against US$ 77.52 billion in 2023-24. Imports were up by 7.44 percent in 2024-25 to US$ 45.33 billion against US$ 42.2 billion in 2023-24. The trade surplus with the US touched US$ 41.18 billion in the last fiscal year, up from US$ 35.32 billion in 2023-24.
US Secretary of Commerce Howard Lutnick
In 2024, India’s main exports to the US included drug formulations and biologicals (US$ 8.1 billion), telecom instruments (US$ 6.5 billion), precious and semi-precious stones (US$ 5.3 billion), petroleum products (US$ 4.1 billion), gold and other precious metal jewellery (US$ 3.2 billion), ready-made garments of cotton, including accessories (US$ 2.8 billion), and products of iron and steel (US$ 2.7 billion).
Imports from the US included crude oil (US$ 4.5 billion), petroleum products (US$ 3.6 billion), coal, coke (US$ 3.4 billion), cut and polished diamonds (US$ 2.6 billion), electric machinery (US$ 1.4 billion), aircraft, spacecraft and parts (US$ 1.3 billion) and gold (US$ 1.3 billion).
The bilateral trade between India and the US is expected to get a boost in the coming years as both are negotiating a trade agreement. The aim is to increase two-way commerce in goods and services to US$ 500 billion by 2030.
However, the parleys are facing delay if not stuck. The earlier goal was to finalise an initial deal by July 9, when Trump’s tariffs are set to kick in, but many sticky issues stood in the way. The US imposes high tariffs on steel and aluminium imports. It also desires more access to the Indian farm sector, about which India has grave reservations given the political clout of the farmers. Farming is also the backbone of the Indian economy.
An Indian team led by Commerce Minister Piyush Goyal visited the US to further the negotiations, followed by a week-long trip to India by a US team of negotiators, which ended on June 10, but despite “productive” talks, forward movement was not evident.
“On our side, one of our major issues is the tariffs they have imposed on steel and aluminium,” the media quoted an Indian official as saying. “We are trying to get a concession on this, but they are not yet agreeing to it.”
Trump’s tariffs
On June 4, US President Donald Trump signed an executive order doubling tariffs on steel and aluminium imports to 50 percent.
This came after his March decision to hike the import duties on these to 25 percent. Following the March tariff hike, India protested and, in May, informed the World Trade Organisation that it reserved the right to impose reciprocal tariffs on the US.
“The US also wants India to open up its agriculture market too much, much more than we can afford to do and also protect our own farmers,” an Indian official said.
Earlier this month, US Secretary of Commerce Howard Lutnick had said a trade deal with India would materialise in the “not too distant future”. Lutnickalso clarified that the Trump administration was not advocating sweeping concessions from India, but “reasonable access to the markets of India.”
“It is not going to be everything and it is not going to be everywhere, but we want to have the trade deficit reduced,” he said.
But Trump has been tough. In a TruthSocial post, he doubled down on his core trade doctrine, saying – “If other countries are allowed to use tariffs against us, and we are not allowed to counter them, quickly and nimbly, with tariffs against them, our country does not have, even a small chance, of economic survival”.
In April, Trump imposed a 27 percent reciprocal tariff on most Indian exports to pressure India into lowering its tariffs. While strategic sectors like pharmaceuticals were exempt, industries such as textiles and machinery were affected.
India resisted US demands to open its markets to wheat, dairy and corn imports, while offering lower tariffs on high-value US products such as almonds, pistachios and walnuts.
India also asked the US to revoke its 10 percent baseline tariff. However, the US opposed this, noting that even Britain was subject to this under its recent bilateral trade agreement. India sought an exemption for its steel exports from a 50 percent tariff.
A potential 26 percent tariff on India would be devastating to Indian goods – including rice, shrimp, textiles and footwear, which together comprise nearly a fifth of India’s merchandise exports. These tariffs would adversely affect FDI in these sectors.
Simpler issues first
India’s Commerce Minister Piyush Goyal said India is prepared to proceed with the deal by first addressing simpler issues. The next phase of negotiations could tackle more complex matters, with the goal of signing the first tranche of the bilateral trade pact by September or October, he said.
India has avoided retaliation, opting instead to negotiate with the administration to ease tariffs. India has pledged to increase purchases of American goods, including energy products like liquefied natural gas, crude oil, coal and defence equipment.
India has already cut duties on a variety of US goods. Basic customs duty on motorcycles completely built-up (CBU) units has been reduced from 50 percent to 40 percent for engine capacities up to 1600cc and 50 percent to 30 percent for those above 1600cc. Effective import duties on Bourbon Whiskey have been lowered from 150 percent to 100 percent. Import duties on carrier-grade Ethernet switches have been cut from 20 percent to 10 percent. Import duties on synthetic flavouring essences and mixtures of odoriferous substances have been reduced from 100 percent to 20 percent.
Basic customs duty on fish hydrolysate, used in manufacturing aquatic feed, has been slashed from 15 percent to 5 percent.
In a major relief for US businesses, India has also abolished the 6 percent Equalisation Levy, which the Office of the US Trade Representative (USTR) had previously termed “unjustified.” Last year, India had already discontinued an additional 2 percent Equalisation Levy, both of which had been affecting US-based companies.
Equalisation tax is a direct tax that is applicable to the income accruing to foreign e-commerce companies from India. Often called the ‘Google Tax’, the Equalisation Levy section aims to tax business-to-business transactions. In fact, with the introduction of the Equalisation Levy section, the Indian Government can now tax global advertising companies and also expand the list of specified services to ensure fairer taxation in the digital economy.
It is hoped that the US will give reciprocal concessions. A growing economy like India’s needs a fair deal from the world’s pre-eminent power.
