MC EXCLUSIVE An India-US trade deal before July 9 hinges on Modi, Trump bonhomie as differences persist

PM Narendra Modi with US President Donald Trump

A mini-trade deal between India and the United States requires a political push from President Donald Trump and Prime Minister Narendra Modi to reach a middle-ground on outstanding issues around farm and dairy. This, after the last leg of in-person negotiations at the level of officials concluded around July 2 or 3, sources told Moneycontrol.

“The two sides have done the talking, now it is a political call, which is what we are waiting for. And the announcement hinges on the schedules of both the heads of states," this source said.

A second source added that India's chief negotiator and commerce ministry's special secretary Rajesh Agarwal returned from the US last night as in-person negotiations, between the Indian team and officials from the the United States Trade Representative, concluded.

While, the Indian side is still hopeful of a trade deal before July 9, New Delhi has toughened its position on issues related to dairy and agriculture, especially genetically modified (GM) crops, as negotiations in Washington continued for a week since the Indian team arrived there on June 27.

Media reports suggest that India may have relented on a request to allow imports of certain genetically modified (GM) farm products used in animal feed even as it remains firm in resisting greater access to its sensitive dairy and agricultural sectors.

Before this, India and US held a round of in-person talks between June 5-10.

While India is looking to secure an exemption from Donald Trump's 26 percent tariffs by sealing a deal before July 9, it is also pushing for significant tariff concessions for its labour-intensive exports such as textiles, leather and footwear.

The US, on the other hand, want greater access for its farm and dairy goods, sectors that are sensitive for India.

Officials had earlier warned that if America continues to press for concessions for its farm, dairy and GM soybean and maize, negotiations for a mini-trade deal may collapse.

A third source aware of the developments, but not directly involved in the talks, told Moneycontrol, "Indian officials are very frustrated. There is a deadline and US is playing very hard. They are not ready to budge on anything."

Without a mini-deal, Indian exports could face a 26-percent reciprocal tariff from the US.

The US's reciprocal duties, which were put on hold for 90 days after Trump's so-called Liberation Day announcement in April were expected to be kick in from July 9 after the pause ends.

However, Trump on July 4 said that his administration will start sending letters informing trading partners of their tariff rates as soon as Friday, as negotiations to avoid higher US levies enter the final stretch.

He said 10-12 countries will get letters on Friday and will range in value from 60-70 percent and 10-20 percent.

Countries will have to start paying these tariffs from August 1, said Trump.

India has been negotiating a scaled-down version of the first tranche of a Bilateral Trade Agreement (BTA) with the US to ensure that it escapes Trump's reciprocal tariffs. The deadline for a more comprehensive BTA is this year’s fall.

Trump on July 2 had signalled optimism around reaching a trade agreement with India. The US has already agreed to limited deals with Britain, China and Vietnam.