India’s July 8 deadline for 'mini-deal' may face hurdles after US doubles metal tariffs

US President Donald Trump with Prime Minister Narendra Modi

The United States’ reluctance, so far, to exempt India from the 50 percent tariffs it has slapped on steel and aluminium imports may prove to be a major roadblock in meeting the July 8 deadline for a “mini-trade deal”, a person aware of the development said.

India and the US are looking to close talks for a scaled down version of the first tranche of a Bilateral Trade Agreement (BTA) before President Donald Trump’s country-specific reciprocal tariffs, including a 16 percent levy on New Delhi, kick in from July 9.

“The decision to increase the steel and aluminium duty from 25 percent to 50 percent is going to impact the timeline of the deal, especially since they are not yet willing to exempt it entirely. Then there is also a question mark on the 10 percent baseline tariff,” the person said.

Apart from the country-specific tariffs that are on pause until July 8, the US has also imposed a 10 percent baseline tariff, which remains in place, on all imports.

Steeling for delay?

Securing exemption from steeper levies on imports of these metals is key since India exported $4.56 billion worth of iron, steel, and aluminium products to the US in FY25.

Even as India is hoping that a trade deal with US will remove the 50 percent levy entirely, the country on May 13 took one of its biggest trading partners to the WTO, proposing to impose retaliatory duties in response to America’s steel and aluminium tariffs.

Not only did the US reject India’s notice at the WTO, after a few days it doubled these tariffs to 50 percent for all countries from June 4. India had moved the WTO against the  25 percent tariffs slapped earlier.

“Over $3 billion worth of exports related to steel may be at risk due to steeper American duties on imports. Apart from that the legality of reciprocal tariffs being questioned in the US, the demand for significant concessions on automobiles and agricultural products is also going to delay the timeline to close the deal,” the person added.

As part of the deal, India sees room to reduce taxes on certain farm goods such as American almonds and pistachios, in return, New Delhi is seeking lower duties on exports such as automobile parts and essential medicines.

While the US has temporarily spared Britain from steel and aluminium sectoral following the signing of the Economic Prosperity Deal (EPD) on May 8, Trump has also reportedly warned that he might increase the tariff on "on or after July 9, 2025" if the island nation does not comply with the trade pact.

Local industry bodies have been asking the government to secure an exemption from higher steel and aluminium levies, however, Trump’s unilateral move to increase the sectoral taxes are expected to prolong negotiations.

Talking trade

Moneycontrol earlier wrote that while the first tranche of the bilateral accord may be finalised only by September or October, India is aiming to firm up talks for a smaller version before Trump’s country-specific reciprocal tariffs kick in early next month.

India and the US are discussing the contours of the trade pact as part of Mission 500, a broader initiative aiming to more than double bilateral trade to $500 billion by 2030.

The two countries held another round of talks on June 5 and 6 in New Delhi, which has reportedly been extended to June 10.

Commerce and industry minister Piyush Goyal was in Washington in May to give talks a push and met his American counterpart Howard Lutnick twice.