Posted on May, 28, 2025 at 05:43 pm
India has reportedly offered the United States a variety of cuts in tariffs to bring a new deal, but has remained firm on specific high tariffs such as grains and dairy.
Both governments aim to finalise a new deal by early July, ensuring that the July 9 deadline for halting tariffs set by US President Donald Trump is not missed.
As trade talks between India and the United States are at an advanced stage, a monthly report by India's finance ministry has said that a successful deal will give a significant boost to exports, while also widening US market access to Indian goods.
According to a report in Financial Times, India has offered "deep cuts" in its import tariffs on different goods to make it happen, but is seeking to maintain its higher levies on sensitive agricultural commodities such as dairy and food grains.
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The economic forecast said that a successful trade pact will turn the current headwinds into tailwinds. India, along with several other nations, has faced difficulty and uncertain times over Trump's decision to impose punitive tariffs on goods being exported to the US.
Trump has called it a fair and reciprocal act, however, his announcement led the global economy and international markets facing severe turbulence.
"A successful US-India trade agreement could flip current headwinds into tailwinds, opening up new market access and energising exports," the monthly economic review said, while speaking about the possible trade deal with the US.
With an annual export turnover of $129 billion in 2024, the United States is India's largest trading partner. The two countries are now negotiating a trade deal with an aim to boost bilateral trade to $500 billion by 2030. At $45.7 billion, the surplus balance of trade is currently in India's favour.
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But this year, the first quarter trade had been hit after Trump's 26 per cent reciprocal tariffs announcement. However, due to domestic factors, Trump had announced a 90-day pause on these tariffs. New Delhi and Washington now aim to firm up the deal within this window.
India is racing to seal a preliminary trade deal with the US to avert Trump’s threatened 26 per cent “reciprocal tariff” on all Indian goods from July 9.
Commerce Minister Piyush Goyal met US counterpart Howard Lutnick and US trade representative Jamieson Greer in Washington last week as both sides are aiming for a likely deal by early July. However, Goyal has made it clear that New Delhi will not rush into a deal, and would finalise a pact only after New Delhi's interests are secured.
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Last month, Goyal had said, "We will always put India first and will ensure that a deal is finalised keeping that sentiment in mind."
He had also said that "time constraints" may only be seen as a motivating factor. "Favourable time constraints motivate us for quicker talks, but till the time we are not able to secure the interest of our country and our people, we do not hurry (into any deal)," he had said.
India and the US have two of the world’s three largest farming sectors, but New Delhi has since India's independence kept high tariff walls around agriculture, which employs nearly half of India's enormous workforce.
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India has made similar demands to protect dairy and other sensitive farming sectors in trade talks with the EU, according to the Financial Times report. However, the negotiations with Washington are particularly challenging as the US is India’s largest trading partner, and Trump has frequently criticised its high import levies, once even calling it a “tariff king”.
The report says that India’s trade negotiators had signalled flexibility on less sensitive farm products such as almonds, which are currently subject to tariffs of up to 120 per cent, and New Delhi might also cut its tariffs of 2.5 to 3 per cent on imported oil and gas.
But it might be more difficult for the Indian contingent to reduce the tariff on dairy and other grain products, as India currently imposes tariffs of 70-80 per cent on US rice and of 30-60 per cent on American dairy products, bringing in significant revenue from the sector.
India, the world’s largest milk producer, has successfully pushed to protect big, politically sensitive sectors such as dairy in other recent trade pacts, including one with Australia in 2022. India has almost 200,000 dairy co-operative societies totalling about 15 million members, mainly small herding families.
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In a deal with the UK agreed this month, India agreed to cut tariffs on alcoholic spirits, cars, including electric vehicles, and car parts, and engineering goods.
Trump last week even criticised iPhone maker Apple’s plans to expand manufacturing in India, which has already helped make mobile phones one of the country’s biggest exports to the US and has become India's new avenue of improving business, industries and employment in India.
India's exports and investment level have thus improved rapidly, with valuation of the rupee remaining stable and foreign exchange reserves remaining on the high side, making the nation an attractive place to invest.
Source: The Federal