India–US Trade Deal: Set to Seal ‘Very Big’ Agreement Covering Energy, Agriculture and Tariffs – Check What Else?

view original post

In a recent analysis, the Indian Ministry of Finance noted that India’s average tariff levels remain higher than those of the US.

India and the United States are nearing the finalisation of a comprehensive bilateral trade agreement that could significantly lower tariffs and reshape commerce across key sectors, including energy, agriculture, aviation, and defence. The announcement comes after US President Donald Trump hinted at a “very big” deal aimed at “opening up India” during a press briefing at the White House.

“We have one coming up, maybe with India. Very big one,” Trump said, comparing it to the recent US–China trade deal. “Where we’re going to open up India… In the China deal, we are starting to open up China.”

Trade between the two nations reached $131.84 billion in FY25, making India the United States’ largest trading partner. The new trade pact — currently referred to informally as a Bilateral Trade Agreement (BTA) — is expected to be provisionally concluded by 9 July, as both countries work through sticking points involving market access and retaliatory tariffs.

In a recent analysis, the Indian Ministry of Finance noted that India’s average tariff levels remain higher than those of the US. A successful BTA would therefore likely favour American exporters, particularly in the energy and agriculture sectors. The US had imposed a 26 per cent reciprocal tariff on Indian imports in April 2025, but suspended it temporarily from 10 April, reducing duties to 10 per cent while negotiations continued.

Energy, Agriculture and Digital Trade: Core Components

India’s rapidly rising energy demands — particularly for LNG — could foster deeper partnerships with US suppliers. CRISIL, the Indian credit ratings agency, emphasised LNG’s advantages in long-term price stability over crude oil, making it an attractive import for India’s energy security roadmap.

Agriculture is another cornerstone of the proposed agreement. While India remains wary of broad agricultural liberalisation, it is likely to increase imports of specific US commodities such as walnuts, pistachios and cranberries. Broader access, however, remains contentious.

Progress has also been made in digital trade, technical standards, and customs cooperation, suggesting a modernised agreement in line with 21st-century commerce. Ram Singh, director of the Indian Institute of Foreign Trade, said: “The ball is now in the US court. India is not for any win–lose trade partnership.”

Defence and High-Value Sectors Gain Traction

Despite India’s push for domestic defence manufacturing, the country remains among the world’s top arms importers. The US, already India’s key strategic partner through the INDUS-X initiative launched in 2023, is poised to deepen defence collaboration further under the BTA. According to observers, this could include co-development, technology transfers and increased procurement agreements.

CRISIL also identified promising areas for Indian exports, including labour-intensive sectors like textiles and gems, and high-value segments such as smartphones and pharmaceuticals. However, the deal may deliver only marginal gains to India’s export volumes, since many Indian goods already enjoy duty-free access to the American market.

Navigating Political Terrain and Global Trade Realignments

Prime Minister Narendra Modi and President Trump had earlier agreed in February 2025 to finalise a phased trade pact by autumn, with a shared goal of increasing bilateral trade to $500 billion by 2030 — up from approximately £191 billion in 2024.

India has simultaneously advanced other major trade negotiations, including a nearly completed free trade agreement with the United Kingdom and ongoing talks with the European Union. These efforts indicate a broader strategic shift by India to diversify trade dependencies, particularly in light of anticipated US policy shifts under Trump’s re-election.

Meanwhile, domestic export data signals resilience in the face of US tariff pressure. India’s exports to the US rose to $17.25 billion during April–May 2025, compared to $14.17 billion during the same period in 2024, suggesting minimal impact from the tariff hike introduced in early April.

While key challenges remain — including India’s resistance to opening up wider agricultural markets and the US seeking stronger digital trade provisions — the momentum is clearly building. The coming weeks are likely to be decisive in determining whether the two democracies can conclude one of their most ambitious trade arrangements to date.