India, US Trade Talks Continue as Tariff Deadline Passes
- India risks facing up to 26% US tariffs as the August 1 deadline set by the US for trade deal implementation has passed.
- A US delegation will visit India in mid-August to continue negotiations, with sensitive sectors like agriculture and automobiles causing delays.
- Experts warn the US model offers no reciprocal tariff cuts, making any potential deal a pressured compromise rather than a true FTA.
With the August 1 deadline for implementing new US reciprocal tariffs having passed, India and the United States are now heading into a crucial phase in their bilateral trade negotiations. A US delegation, led by Brendan Lynch, the US Trade Representative for South and Central Asia, is expected to visit New Delhi in mid-August to continue efforts toward a potential bilateral trade agreement (BTA).
This development comes after Indian negotiators concluded another round of discussions in Washington last week, amid mounting uncertainty over the imposition of steep US tariffs on Indian exports. The current negotiations are focused solely on market access for goods, with sensitive sectors like agriculture and automobiles emerging as key sticking points. Both are considered vital for job creation and economic stability in India, making any concessions politically sensitive.
The pressure on India intensified after US Commerce Secretary Howard Lutnick confirmed in a television interview that August 1 is a 'hard deadline' for countries to begin paying new reciprocal tariffs, irrespective of ongoing negotiations. “That’s a hard deadline, so on August 1, the new tariff rates will come in… Nothing stops countries from talking to us after August 1, but they’re going to start paying the tariffs”, Lutnick said.
According to US authorities, the new tariff structure includes a surcharge of up to 26 percent on certain imports from larger economies like India if no trade deal is signed. For smaller nations in regions such as Latin America, the Caribbean, and Africa, a baseline 10 percent tariff would apply. The message from the US administration is clear: open up your markets or pay the price.
India, however, remains hopeful that a mutually beneficial agreement can be reached by the end of this year. Government sources emphasize that any bilateral trade deal should create tangible market access for India's labour-intensive industries, such as textiles, leather, and agriculture. The country is also aiming to secure a tariff differential that would make Indian products more competitive compared to exports from other Asian economies.
President Donald Trump, who has pushed for reciprocal tariffs as a cornerstone of his trade policy, has repeatedly claimed that a deal with India is 'very close'. Yet, the shifting deadlines first set for April 1, then July 9, and finally August 1 have only added to the uncertainty. The current scenario suggests that while talks will continue, Indian exporters may have to endure interim tariff hikes unless a breakthrough is achieved soon.
Trade experts remain skeptical of the nature of these so-called trade 'agreements' being pushed by the Trump administration. According to the Global Trade Research Initiative (GTRI), Trump’s model does not conform to World Trade Organization (WTO) standards for Free Trade Agreements (FTAs). Under WTO rules, FTAs are required to include mutual tariff reductions on a significant share of traded goods. However, under the Trump model, the US demands that partner countries reduce their Most-Favoured-Nation (MFN) tariffs, while the US offers no corresponding reductions.
“Trump lacks Fast Track Trade Authority from Congress to reduce MFN tariffs. Instead, he’s offering to roll back only the ‘Liberation Day’ tariffs imposed in April under emergency powers”, GTRI stated in a report. These so-called Liberation Day tariffs currently under legal challenge have added a 26 percent surcharge on top of standard US tariffs applied to Indian goods.
Even if an agreement is reached, Indian exporters may still be subject to a minimum 10 percent levy, making any potential deal a reluctant compromise rather than a genuine partnership. “This is more of a pressured adjustment than a win-win trade pact”, GTRI noted.
Indian policymakers are reportedly weighing their options carefully. While access to the US market is critical, especially at a time when India is attempting to boost its manufacturing and export sectors under the 'Make in India' initiative, any deal that disproportionately benefits the US without tangible reciprocity could trigger political backlash at home.
As negotiations resume in August, both sides will need to navigate not only the technical aspects of trade but also the strategic optics. For India, securing favorable terms while protecting key domestic sectors will be crucial. For the US, showing that it can bring large economies like India into its trade fold is important, especially in an election year.
Ultimately, while the August 1 deadline has passed, the negotiations are far from over. The next few months could determine whether India and the US can reset their trade relationship on a more balanced footing or if rising tariffs will cast a long shadow over future economic ties.
