Negotiating the Fine Print: India’s Calculated Stance in US Tariff Talks

India and the US have entered the final stretch of a high-stakes trade negotiation, with both sides aiming to conclude a deal before the August 1 tariff deadline set by US President Donald Trump. While the talks have been extended past the original July 9 cutoff, the delay signals both progress and unresolved friction points—particularly on agriculture, digital trade, and market access.

At the heart of the negotiations lies a delicate balancing act: India is seeking better access for its labour-intensive exports such as textiles, footwear and auto components, while the US is pressing for lower barriers in politically sensitive sectors including agriculture, dairy, and genetically modified seeds. India has firmly drawn a red line on these sectors, with Agriculture Minister Shivraj Singh Chouhan reiterating that “India will not compromise on the interests of farmers.”

A Fragile Window Amid Rising Global Tariffs

The urgency is driven by Trump’s new wave of reciprocal tariffs on 14 countries, including major Asian exporters such as Japan, South Korea, Malaysia, and Bangladesh. While India was notably excluded from the tariff list, the exemption is temporary. The White House has made clear that tariffs—ranging from 25% to 40%—will be imposed on countries without a finalised deal by August 1. India’s current tariff rate on exports to the US stands at 26%, combining a base 10% with a 16% add-on duty, introduced earlier this year as part of a broader Trump trade overhaul. A successful deal could see India preserved from the harsher tariff regime now set to hit other Asian economies. But failure to reach agreement could see Indian exports subjected to the full brunt of Trump’s tariff arsenal—at significant cost to competitiveness and supply chains.

Strategic Leverage and Asymmetry

From New Delhi’s perspective, the temporary reprieve from new tariffs reflects both India’s geopolitical leverage and Washington’s desire to secure at least one favourable trade deal in Asia. With Trump’s broader “America First” push triggering disputes with other BRICS members, including China and South Africa, India remains the most viable partner among emerging economies. But the asymmetry of demands is stark. India has made a final “decent offer,” covering goods trade worth up to USD 200 billion, according to officials. Yet the US side has yet to reciprocate with equivalent market access guarantees or tariff relief. Indian negotiators are determined not to replicate the Vietnam model, where perceived concessions failed to yield long-term benefits.

India is also watching the broader trend. The US has shown a growing willingness to override multilateral norms and impose unilateral tariffs—especially on countries deemed to challenge US trade interests or global influence. This raises the stakes for New Delhi, which must balance short-term tariff relief with long-term strategic autonomy.

Economic and Political Implications

The trade relationship is central to India’s economic and export strategy. The US is India’s largest trading partner, with merchandise exports touching USD 86.5bn in FY25—an 11.6% yr/yr increase. Imports totalled USD 45.7bn, leaving India with a trade surplus of over USD 40bn. A well-calibrated trade agreement could lock in tariff advantages over regional competitors like Bangladesh, Vietnam, and Malaysia, all of whom now face steep US import taxes. But if the deal disproportionately opens Indian markets—especially in politically sensitive sectors—without reciprocal US concessions, it could undermine India’s domestic industries and erode hard-won policy space. It’s worth noting that farmers constitute a critical vote bank in India, and liberalising agriculture and dairy—especially under external pressure—risks triggering significant backlash. Such a move could alienate key rural constituencies, erode Modi’s popularity, and even jeopardise political stability, with potential for coalition partners or BJP MPs to withdraw support under public pressure. This would not be unprecedented—India’s political landscape has seen rural unrest lead to major electoral consequences, as seen during the 1980s Green Revolution backlash or more recently during the 2020–21 farm law protests.

Geopolitical Optics and the Trump Doctrine

President Trump’s rhetoric has added further complexity. At a recent event, he warned that BRICS nations—India included—may face a 10% “reciprocal tariff” unless trade deals are finalised. He has also hinted at tariffs as high as 200% on select pharmaceutical imports. These statements, while politically targeted, serve as reminders of the volatility surrounding US trade policy under Trump’s leadership. The US administration’s approach appears less about reciprocal market access and more about leveraging trade policy to amplify American influence. 

Outlook: A Strategic Inflection Point

With just weeks to go, the India–US trade talks are poised at a critical juncture. For India, this is about more than averting tariffs—it’s about defining the terms of engagement with a US administration that is recalibrating its global trade relationships. The decision to hold firm on agriculture, resist GM seed access, and push for meaningful concessions on garments and electronics reflects a maturing trade strategy that aligns economic growth with domestic political realities. If a deal is struck, it could serve as a template for India’s evolving position in global trade diplomacy—balancing engagement with autonomy, and short-term gains with long-term strategic posture.