India and the United States are poised to sign an interim trade agreement this week after months of negotiations, marking a significant development in bilateral economic relations. The deal focuses on key sectors including agriculture, processed food products, and industrial tariffs.
Under the agreement, India will lower import duties on select U.S. agricultural goods such as apples, blueberries, blackberries, and certain processed foods. However, New Delhi has firmly drawn the line at genetically modified (GM) crops. Indian officials cited domestic sensitivities and upcoming trade discussions with the European Union and EFTA as key reasons for excluding GM products from the pact.
The deal proposes a new tariff structure, under which Indian exports to the U.S. will attract an average duty of 11.5%, while U.S. goods entering India will face a 7% tariff.
India has also resisted the U.S. proposal for a uniform tariff on automobiles. Instead, it pushed for a tiered system based on vehicle type and category—an approach reportedly accepted by the American side.
Dairy products were another sticking point. While the United States sought broader access to the Indian dairy market, India refused to open the sector fully, citing concerns about the impact on small-scale farmers. As a compromise, only processed dairy items will be permitted under the interim deal.
This agreement comes as the U.S. reshapes its global trade policy. President Donald Trump has announced steep tariff hikes on imports from the European Union, Japan, South Korea, Mexico, and others starting August 1. In this shifting landscape, India is emerging as a vital trade ally.
A recent report by SBI Research highlights the potential economic windfall for India from this realignment. According to the study, if India captures just 2% of the U.S. chemical imports market—particularly in pharmaceuticals—it could boost India’s GDP by 0.2%. A similar increase in India’s share of the U.S. apparel market by 5% could add another 0.1% to GDP.
India is also re-evaluating its Free Trade Agreement (FTA) with ASEAN nations, aiming to close tariff loopholes and curb the flow of Chinese goods via ASEAN partners.
However, the SBI report flags serious risks if India were to fully open its dairy market to U.S. imports. A 15% fall in milk prices could lead to a farmer income loss of ₹1.03 lakh crore and reduce India’s gross value added (GVA) by ₹51,000 crore, with significant implications for rural employment.
Commerce Ministry officials have already reached Washington, with the final round of negotiations and signing expected to conclude later this week. The interim agreement is seen as a stepping stone in a larger framework of future trade talks between the two nations.
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