MC EXCLUSIVE India's trade deal with US may take at least 6 months, missing 90-day tariff pause window

PM Narendra Modi with US President Donald Trump (Courtesy: Reuters file photo)

India is likely to take at least six months to conclude negotiations and finalise the first tranche of the proposed Bilateral Trade Agreement (BTA) with the US, potentially dashing hopes of closing this crucial trade deal within President Donald Trump’s 90-day pause on country-specific tariffs, a source privy to the talks said.

While both nations have firmed up the Terms of Reference (ToR) for the proposed trade deal, the US is yet to reveal its complete wish list on goods they would want lower tariffs.

“Both sides still have to go to the sectoral bits… we have not reached that stage, we have readied an initial framework, so it will be difficult to wrap up within the 90-day pause and could take six months minimum to agree on some of the chapters, if not few,” this source told Moneycontrol.

While New Delhi has been agreeable to most of the US’s demands as part of the proposed BTA, America’s wish list on tariff cuts centres around India’s sensitive agriculture sector.

This could make it more difficult to wrap up talks for the BTA quickly, the source cited above said.

India has always been protective of its agriculture sector while negotiating trade deals.

Not too long ago, in 2021, India dropped out of the Regional Comprehensive Economic Partnership (RCEP) free-trade agreement involving the Association of Southeast Asian Nations, citing its negative effects on farmers and the dairy sector.

“Though the US has not revealed its entire wish list on tariff cuts, they primarily want lower duties on major farm goods,” the source added.

The bone of contention

Moneycontrol had previously reported that while 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.

Only a few days after announcing “discounted” reciprocal tariffs on around 75 nations, Trump on April 9 paused this move for 90 days for all except China.

While the 10-percent baseline tariff has been operational, the country-specific duty, including a 16-percent one on India, is now expected to be implemented in early July.

India has been looking to wrap up negotiations for the trade deal with the US within the period of pause for reciprocal tariffs in a bid to safeguard exports from steeper duties.

Earlier in April, the commerce ministry noted that India and the US are looking to conclude negotiations for the first tranche of the proposed BTA well before the agreed timeline of the Fall of 2025 after both nations signed the terms of reference for the pact.

To be sure, Trump on April 29 said that tariff talks with India were "going great" and suggested there was a possibility the two nations could reach a deal.

"Talks with India on tariffs were coming along great, and he thinks the two countries will reach a deal," Trump was quoted as saying by Reuters.

US Commerce Secretary Howard Lutnick in an interview to CNBC on April 29 said that he had secured an agreement with one foreign nation that could permanently alleviate the "reciprocal" tariffs Trump intends to impose.

While, Lutnick did not disclose the name of the country, stating that the deal is still awaiting local approvals, reports suggest his comments may be referring to India.

The BTA is part of a new goal – Mission 500 – aiming to more than double bilateral trade between the two countries to $500 billion by 2030.

On April 29, India’s commerce ministry said India and the US are betting on opportunities for early mutual wins as both sides inch closer to finalising a multi-sector BTA by the Fall of 2025 with in-person sectoral-level engagements planned from the end of May.

Sectoral expert-level engagements have already taken place virtually.

India ranks tenth among the top nations exporting to the US, at $91 billion in 2024, with Mexico, China and Canada occupying the top three positions.

The US is India's top export destination and the fourth-largest source of imports.