As a trade war brews in Asia, India hopes to avoid the full brunt of America's tariff blitz. However, behind closed doors, negotiations are precarious, with enormous stakes.
While Vietnam, Laos, Myanmar, and the Philippines have already suffered direct consequences from sweeping US tariff increases, some as high as 40%, India has kept a backchannel open, hoping to reach an agreement that would cap duties on its exports at a more manageable 20% or less.
The discussions have been intense. A senior-level team from New Delhi is expected to fly back to Washington in the coming days, marking their third such mission in as many months. US negotiators have already been to India twice this quarter.
Key Highlights
- India‑US aim interim deal by August 1, targeting sub‑20% tariff cuts while protecting key agriculture sectors.
- Sticking points include GM‑crop certification and dairy tariffs; India resists U.S. demand amid farmer concerns.
Both sides are attempting to develop a joint framework that will soften the blow and leave room for future discussions. The August 1 deadline looms large. If talks fail, Indian exporters will lose their 90-day exemption window and become subject to the same tariff net tightening that is affecting much of Asia.
In private, Indian officials admit that they are under pressure. With a $40 billion trade surplus with the United States, India was among the first countries targeted by Donald Trump's trade reset. Even now, the US president is reportedly considering imposing blanket tariffs of 15-20% on most countries without preferential treatment.
The situation was described as "a race against time" by one US official. They believe that if India accepts some tough compromises, it may be able to negotiate a softer landing. But this is exactly where things become murky.
Genetically Modified Seeds of Discord
Top of the list is the United States' demand that India allow genetically modified agricultural imports. The move has sparked outrage among Indian farm unions, academic circles, and even Parliament. Critics warn that if GM crops enter Indian markets, they may contaminate native varieties and jeopardize future exports to countries that prohibit genetically modified foods.
"It's a Trojan horse. "Once it enters, there is no turning back," said a senior agricultural scientist who advises the Indian government.
Dairy Demand Breaks Sacred Lines
The dairy issue is no less complex. American cattle are frequently fed animal byproducts, which violates Indian religious norms. Allowing such imports would cross a highly sensitive line, which India has repeatedly stated that it will not compromise on.
Costly collateral damage
Indian manufacturers are already feeling the pinch. Automobile component exports, which account for nearly 28% of India's US-bound shipments, now face a 25% tariff.
The credit agency ICRA estimates that this alone could burn a Rs 9,000 crore hole in the sector. Then there's the 50 percent levy on Indian steel and aluminium exports, which threatens a $4.5 billion trade stream.
Digital Flashpoints and Data Fights
Beyond the factory floor, the digital battlefield is heating up. Washington wants India to loosen the rules under its new Digital Personal Data Protection Act, which restricts offshore data transfers.
It also wants stronger intellectual property enforcement and market access for multi-brand retail, which could benefit U.S. tech and retail behemoths like Amazon and Walmart.
Also Read: Indian Negotiators Head to US Again to Resume Trade Talks
Brics Factor and Political Chill
Geopolitics adds fuel to the fire. Trump has publicly criticized BRICS, the global south bloc that includes India, China, Brazil, Russia, and South Africa, as a threat to American financial dominance.
While claiming that a trade agreement with India is "within reach," he has also warned of additional tariffs on all BRICS countries. A senior Indian negotiator put it succinctly: "This is a deal we cannot afford to rush, but also cannot afford to lose."
Trade experts believe both sides will settle for a "mini-deal" that avoids the more difficult issues, at least for the time being, while giving Trump a victory to tout on campaign trail.
But with Trump's policy mood swinging like a pendulum, even the best-laid plans are uncertain until the ink dries.
