The much-awaited trade agreement between India and the United States seems to have hit a roadblock for now as President Donald Trump has announced a 25% tariff on Indian goods starting August 1.
Despite several rounds of talks, the two nations have not managed to bridge key differences.
Speaking at a press conference at the White House, Trump said that India remains one of the highest tariff-imposing countries in the world, but discussions are underway.
But what are the main stocking points that have played a huge role in both countries not agreeing on a trade deal?
AGRICULTURE AND DAIRY AT THE CENTRE
One of the biggest sticking points in the trade discussions has been India’s firm resistance to opening up its agriculture and dairy sectors. New Delhi argues that allowing cheaper, subsidised US farm goods into the country would harm the income of millions of small farmers.
“Agricultural and dairy product protections remain primary concerns, as these sectors are politically and economically sensitive for India. Hence, India is negotiating with US against any tariff reductions on dairy, rice, wheat, and genetically modified (GM) crops like corn and soybeans citing the livelihoods of over 700 million rural citizens, including 80 million smallholder dairy farmers,” said said Sankhanath Bandyopadhyay, economist at Infomerics Valuation and Ratings.
“The U.S. is pushing for greater access to India’s agricultural market, particularly for GM crops, dairy, and products like corn, soybeans, apples, almonds, and ethanol, insisting on tariff reductions in these sensitive sectors, a move India continues to oppose,” he added.
India has told the US that reducing tariffs on dairy, rice, wheat, and genetically modified (GM) crops like corn and soybeans is not possible right now. Officials say it could hurt over 700 million rural people, including around 80 million small dairy farmers. In short, these sectors are not just about trade, they affect people’s livelihoods and food security.
US WANTS LOWER TARIFFS ON A RANGE OF GOODS
The US is pushing for better access to the Indian market across a wide range of products. These include GM foods, dairy, ethanol, apples, almonds, autos, medical devices, pharmaceuticals and even alcoholic drinks. It also wants India to cut down its non-tariff barriers, simplify customs rules, and relax laws on data storage, patents and digital trade.
India, however, has been cautious about these demands. While it has allowed more imports of energy and defence equipment from the US, Indian officials say they are yet to see strong commitments from Washington in return.
TRUMP FLAGS HIGH INDIAN TARIFFS AS A PROBLEM
President Trump has frequently highlighted what he sees as India’s high tariff rates. According to a White House note, India’s average tariff on farm goods is around 39%, compared to just 5% in the US. Some Indian duties are as high as 50%.
Speaking to reporters on Wednesday, Trump said, “They have one of the highest tariffs in the world now, they’re willing to cut it very substantially. We’re talking to India now – we’ll see what happens.”
Despite his comments, he confirmed that a 25% tariff will begin from Friday, August 1, covering a wide range of Indian exports.
INDIA FEARS UNPREDICTABLE POLICY FROM US
Another concern is the uncertainty surrounding trade policy. Indian officials say they have been waiting for detailed proposals, but many of the US demands keep shifting, reported Reuters. For example, in recent months, the US has raised tariffs on Indian steel and aluminium to 50%, imposed 25% tariffs on autos, and has now expanded duties across more sectors.
Some trade experts in India are also worried about the political tone of the US approach, especially after Trump claimed he helped mediate a ceasefire between India and Pakistan earlier this year. Though the trade talks are separate from foreign policy, such remarks have created unease in New Delhi.
EXPORTERS WORRY ABOUT NEW TARIFF HIT
Many Indian exporters are now preparing for the worst. The new 25% US tariff could affect products like gems and jewellery, auto parts, seafood, textiles and chemicals. These are major exports to the US.
“Sectors like textiles, pharmaceuticals, and automotive components, key Indian exports, are likely to be most impacted,” said Utsav verma, Head of Research – Choice Institutional Equities.
In 2024, India exported goods worth $87 billion to the US. Top items included gems and jewellery (Rs 8.5 billion), pharmaceuticals (Rs 8 billion), petrochemicals (Rs 4 billion), electronics and garments. In addition, India’s services exports to the US—mainly IT and consultancy were worth $33 billion.
NO DEAL DESPITE POSITIVE SIGNS
At one point, both sides had shown strong interest in signing a “first-phase” trade pact. Prime Minister Modi and President Trump had aimed to push bilateral trade to $500 billion by 2030, up from $191 billion in 2024. But talks have slowed down sharply over the last few weeks.
Indian trade officials were hopeful until recently. But now, the focus has shifted to protecting key exports from the impact of the US decision, as perReuters.
It’s not just US complaints either. American companies have also struggled with India’s tariff structure. US exports to India, worth nearly $42 billion in 2024, face tariffs ranging from 7% on machinery to 20% on transport equipment. Food items attract duties as high as 68%.
The next steps are unclear. While Trump has announced the 25% tariff from August 1, he has also said talks are continuing. A US trade team is expected to visit India in August for further negotiations. Whether this visit leads to any resolution remains to be seen.
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