The prospects of an interim trade deal between India and the United States reportedly appear bleak as talks remain stalled over contentious tariff reductions, according to Indian government sources who told news agency Reuters. The deadline for reaching this agreement was set for August 1 by Washington.
In April, US President Donald Trump had threatened to impose a 26 per cent tariff on Indian imports. Although the implementation was initially paused to allow for negotiations, this pause is set to expire on August 1, with India yet to receive a formal tariff letter from the US, unlike other nations. This situation has added pressure on both sides to reach a resolution quickly.
India’s trade discussions, spearheaded by chief negotiator Rajesh Agrawal, have not achieved a breakthrough even after five rounds of talks in Washington. “An interim deal before August 1 looks difficult, though virtual discussions are ongoing,” noted one of the Indian government sources, as per the report.
The primary issues stalling the negotiations involve India’s reluctance to open its agriculture and dairy sectors and the US’s resistance to lowering tariffs on Indian steel, aluminium, and autos. Officials are considering deferring these matters to a later phase post an interim agreement. This strategy could potentially ease current tensions, allowing for more focused discussions on these sensitive topics later.
Ajay Sahai, Director General of the Federation of Indian Export Organisations, highlighted potential negative impacts on sectors like gems and jewellery if the 26% tariffs are enforced. “However, this could be temporary, as both countries aim to sign the deal over time,” he remarked.
US Treasury Secretary Scott Bessent highlighted the Trump administration’s preference for the quality of trade agreements over their timing. When asked about a potential extension of the deadline, he indicated that the decision rests with President Trump, suggesting flexibility could be possible.
Indian officials maintain optimism towards reaching a more comprehensive agreement by September or October, aligned with discussions between Prime Minister Narendra Modi and President Trump earlier this year. “Given that there have been five rounds of negotiations and another US delegation is expected, we remain optimistic about finalising a trade pact,” a third government source expressed.
Both the Indian Commerce Ministry and the US Trade Representative’s Office have not yet responded to requests for comment on the ongoing negotiations.