No Deal Yet: India–US Trade Talks Stretch Beyond August Deadline
India and the US have made progress in negotiations for an interim trade deal, but key sticking points—particularly around agriculture and autos—remain unresolved ahead of the August 1 deadline for new US tariffs. President Trump’s tariff-first strategy has pushed India to seek partial relief, but the deal is unlikely before the deadline. While both sides remain committed to a broader trade agreement by year-end, India faces growing pressure to balance domestic interests with the need to preserve export competitiveness and avoid retaliatory measures.
With less than two weeks to go before the US enforces a sweeping new tariff regime, negotiations between India and the US remain delicately poised. Despite a series of high-level meetings and five formal negotiation rounds since March 2025, the two sides have yet to finalise even an interim trade pact—underscoring the complexity of aligning economic priorities in today’s coercive trade environment.
President Donald Trump’s new tariff framework—announced at a recent AI summit—sets duties ranging from 15% to 50% on all imports, with a hard deadline of August 1. For countries that fail to strike a deal, these levies will be applied unilaterally. India was among over 20 countries to receive formal notification, sparking urgent efforts to avoid a repeat of the tariff standoff of 2019–2020.
Talks Progress, But No Breakthrough
Indian and US negotiators met in Washington from July 14–17 in what was billed as a crucial round of talks. However, no formal breakthrough was announced. Sources say the two sides remain divided on key issues, particularly around agricultural access, dairy imports, and digital trade. The US has been pressing India to ease entry for genetically modified (GM) crops and broader farm goods—an ask that New Delhi finds politically sensitive, especially with national elections looming in early 2026.
On autos, India is seeking relief from the 25% duties imposed on its vehicle exports to the US since May. These tariffs impact nearly USD 3 bn in annual export value. But Washington insists these are national security tariffs not subject to WTO scrutiny. Both sides are now reportedly considering excluding agriculture and dairy from the scope of the interim deal. While this may help expedite the agreement, it risks leaving contentious issues unresolved, complicating any comprehensive bilateral trade pact expected later in the year.
A US delegation is scheduled to visit New Delhi in August to resume talks. However, with the August 1 tariff deadline holding firm—as confirmed by US Commerce Secretary Howard Lutnick—any interim deal will not be finalised before the new rates take effect.
Trump’s Transactional Trade Template
This negotiation sits within a broader reordering of US trade policy. Under Trump’s “reciprocal tariffs” doctrine, tariff rates are being used as negotiation levers rather than enforcement tools. Countries willing to meet US investment or import demands have secured better outcomes—Japan, for instance, saw proposed tariffs cut from 25% to 15% after agreeing to open its market and support a US-led investment plan.
Indonesia struck a similar deal this week, agreeing to a 19% tariff—down from a threatened 32%—in exchange for USD 34 bn in US imports and investment pledges. India is hoping for similar treatment, with expectations that its tariff rate could be capped at 15%, but is it unlikely. Trump has said that the tariff cap is likely to be 20% in the interim deal, below the 26% penalty for non-compliant countries.
But this model of coercive bilateralism raises longer-term questions. While it may deliver short-term deals, it erodes trust in multilateral rules and blurs the line between diplomacy and economic pressure. For India, which has historically pushed back against one-sided trade terms, the balancing act is particularly delicate.
What’s at Stake
India’s key objectives are clear: preserve preferential access for exports like textiles, pharmaceuticals, and auto components; limit exposure to discretionary tariff hikes; and avoid broader regulatory concessions, particularly in agriculture and data localisation. The US, for its part, wants greater market access for its agricultural and tech sectors, fewer restrictions on digital trade, and higher imports of American goods to reduce the bilateral trade deficit, which stood at nearly USD 18 bn in 2024.
The interim pact under discussion would serve as a stopgap measure, offering India tariff relief in return for moderate concessions, while deferring harder issues to a more comprehensive deal expected by end-2025. But even that modest ambition faces risk. If the August 1 tariffs come into effect without a deal in place, Indian exports could face duties of 20–26%—eroding competitiveness in sectors already battling global demand softness. Equally, New Delhi may come under pressure to reciprocate with tariffs of its own, which could reignite a tit-for-tat trade dispute.
Outlook: A Deal Deferred, But Still Possible
Despite Trump’s “deal-making” rhetoric and both sides’ interest in de-escalation, it now seems unlikely that a formal agreement will materialise before August 1. That does not necessarily preclude a deal. As Lutnick noted, countries can still negotiate after the deadline—but the tariffs will be imposed in the interim. From a macroeconomic standpoint, the delay adds uncertainty to India’s export outlook in H2 2025, at a time when external demand is already patchy. From a geopolitical lens, it reflects the challenge of navigating a transactional US trade policy while preserving strategic autonomy and domestic political red lines.