India bets on speeding up FTA talks with EU, Peru, Chile to diversify exports from US

Therefore, even as India has adopted a wait and watch approach, it is working to diversify exports to Latin American nations and Europe, including speeding-up trade talks to gain preferential access.

India is currently negotiating deals with the EU and Peru, while with Chile it is looking to expand a Preferential Trade Agreement, signed back in 2006.

The US’s share in India’s overall exports is mostly around 16-17 percent, out of which as much as 10 percent can be shifted to Latin American nations as well as to the EU to avoid steeper tariffs imposed by President Trump’s administration.

“Sectors hit hardest by Trump’s latest tariff move, including marine products, textiles and gems and jewellery are looking to diversify to these markets,” according to the source.

India exported ready-made garments, gems and jewellery and marine products worth nearly $18 billion to the US in FY25.

India overall exports to the US stood at $86.51 billion in FY25.

“A drop of 3-4 percent is expected in Indian exports to the US given 25 percent tariffs on India, without taking into account the unspecified penalty linked to India’s Russian ties,” the source said.

A faster FTA with Peru and Chile would give Indian steel and aluminium exporters easier access to those markets, avoiding the 50 percent tariffs currently imposed by the US.

“It could also allow India to reroute some of our engineering goods, many of which rely on steel and aluminium—through these Latin American countries. By doing so, we might bypass the higher US tariffs and gain better trade terms,” the source added.

Engineering goods are India’s top export to the US amounting to almost $20 billion in FY24-25.

While India and US are still negotiating a Bilateral Trade Agreement (BTA), aimed to the concluded this fall, the US on July 30 imposed a 25 percent tariffs on Indian goods along with an unspecified penalty for purchasing Russian arms and energy.

This after talks on a mini-deal before August 1, when Trump’s country-specific tariffs kicked in, seemingly failed.

EU-Peru-Chile

India and EU concluded their 12th round of negotiations in Brussels between 7 and 11 July 2025 wherein both sides managed to reach an agreement in principle on the Digital Trade chapter and Anti-Fraud clause, pending some technical consultations.

While India and EU are aiming to conclude talks by the end of this year, both sides are looking to speed up negotiations to get a deal before that deadline, the source said.

“Now that the US-EU deal is done, the focus can shift to India,” another source said.

EU and the US have reached a tentative deal wherein the US will get zero-tariff access to European markets while levying a 15 percent tariff on imports from the EU.

EU is India’s largest trading partner. Indian exports to the bloc stood at $98.34 billion in FY25. The next round of talks with the EU is scheduled for September, but virtual negotiations continue.

India has also conducted eight rounds of physical talks with Peru, while with Chile it held formal negotiations in May for a comprehensive FTA.

“Engineering goods, machinery, textiles, gems and jewellery, marine products, leather are some of the exports that can be shifted to these Latin American nations and the EU,” the first source said.

India’s exports to Latin America stood at $15.17 billion in FY25.

The source added, certain key exports would continue to access the US market despite higher tariffs, especially certain auto parts and components, which face 25-percent sectoral duties from America given their limited ability to diversify.

India-US deal dilemma

Sources said that India will keep pursuing talks for a trade deal with the US and seek more clarity on the 25 percent tariff plus penalty imposed on the country.

“India is looking to stay quiet until we receive clarity on the nature of the tariffs and penalties as well as its implications on Indian exports,” the first source said.

Talks hit a road-block when the US kept insisting on greater access to India’s agriculture, dairy markets as well as access for its genetically modified crops, the source said, adding that there was never an agreement on these issues since talks started in March till the latest round in July.

A team of American negotiators are expected in New Delhi to hold another round of talks mid-August. Both sides have concluded five rounds so far.

Briefing Parliament on July 31, commerce minister Piyush Goyal said the ministry is assessing the impact of the tariffs and is taking feedback from stakeholders. He also vowed to protect the interest of Indian farmers, MSMEs and workers.

Sources said that India was seeking anywhere between 10-16 percent tariff on Indian goods while agreeing to offer zero duties on a host of US products, including industrial goods.

But the Trump administration's demand for sweeping concessions on sensitive sectors led to the negotiations stalling. In fact, India had also agreed to limited concessions on apples and duty removals for nuts, sources said.

India is currently negotiating a trade deal with Oman as well, in which talks are at an advanced stage. Exporters have also urged the country to pursue a trade deal with Mexico.

The country recently signed a trade agreement with the United Kingdom, which may take a year to be operational, while the one with EFTA nations — Iceland, Liechtenstein, Norway and Switzerland — is expected to be implemented from October this year.