India nears interim trade deal with US to avoid Trump’s tariffs

India is poised to finalise an interim trade agreement with the United States as early as this week, aiming to avoid the steep tariffs imposed by former President Donald Trump’s so-called “liberation day” tariffs, according to sources familiar with the negotiations, cited by the Financial Times.

This interim deal would mark one of the first trade agreements between the US and a major trading partner under the current administration, serving as a preliminary step toward a broader, comprehensive bilateral agreement. Both countries have indicated plans to complete the initial phase of the full accord by this autumn.

India faces tariffs of up to 26 per cent, among the highest the US has imposed on any major economy, under Trump’s tariff policy announced on April 2. The US set a July 9 deadline for new trade agreements to prevent these levies from taking effect.

On June 30, White House press secretary Karoline Leavitt stated that US officials were “finalising” trade agreements and promised that announcements regarding India would be made soon.

Rajesh Agarwal, leader of the Indian negotiating team, was in Washington on Monday working to resolve the final details of the deal. India’s Foreign Minister S. Jaishankar is expected to hold direct talks with US Senator Marco Rubio on July 1 or 2, on the sidelines of the Quad summit in Washington.

Sources involved in the discussions said the agreement would likely exempt India’s large and politically sensitive agricultural sectors—including wheat and dairy—from US tariffs, though talks were ongoing. A senior Indian official, speaking on condition of anonymity, noted “a lot of sensitivity” surrounding agriculture.

India has also agreed to increase imports of US natural gas as part of efforts to reduce its $41.2 billion trade surplus with the US in the 2024-2025 fiscal year. Both sides have agreed on tariff reductions affecting thousands of products.

During Prime Minister Narendra Modi’s visit to Washington in February, the two countries committed to more than doubling bilateral trade to $500 billion by 2030. Trump recently pledged a “very big” trade deal to “open up India,” and expressed hopes for “a full barrier dropping, which is unthinkable.”

Agricultural and dairy products remain among the most sensitive issues. India has historically protected its dairy industry in trade talks, including with the European Union. This sector supports over 80 million people, many of whom are small farmers. Concerns persist over imports of foreign dairy products that may violate Hindu dietary restrictions due to cattle feed practices.

An individual directly involved in the negotiations noted India’s agreement to import certain US farm products like nuts and fruits, despite pressure from American industry groups seeking broader market access.

White House deputy press secretary Kush Desai cautioned that “discussion about any potential trade deal should be considered speculation unless officially announced by President Trump.”

Modi’s government has pursued an active trade agenda this year, finalising a long-awaited agreement with the UK in May and targeting a deal with the EU by the end of 2025.

New Delhi and Washington have also strengthened defence, technology, and diplomatic cooperation as part of a shared strategic approach toward China. Trump has encouraged India to increase purchases of US weapons to help address the trade deficit.

However, tensions remain, as Modi’s government publicly opposed Trump’s recent claims of brokering an end to a brief conflict with Pakistan and his offer to mediate on the disputed Kashmir region.

By Tamilla Hasanova