As the clock ticks down to July 9, the much-anticipated India–US trade deal is teetering on the edge. Despite weeks of high-level negotiations, both sides remain locked in a stalemate, with the Indian negotiators extending their Washington visit in a bid to resolve differences.
The stay of the Indian officials has already been extended for three days until June 30. Initially, the delegation was scheduled to stay for two days with the talks having commenced on June 26.
The current round of talks is especially important because the US has already wrapped up negotiations with China — even though those began later than talks with India. That deal has helped ease US-China tensions. Meanwhile, Indian businesses had started gaining an edge, as Chinese goods faced higher tariffs than Indian products.
On Tuesday, US President Donald Trump said the United States could reach a trade deal with India that would cut tariffs for both countries and help American companies compete in India's market of 1.4 billion consumers.
India is one of more than a dozen countries actively negotiating with the Trump administration to try to avoid a steep spike in tariff rates on July 9, when a 90-day tariff pause ends. India could see its new "reciprocal" tariff rate rise to 26 per cent from the current 10 per cent.
What’s causing the delay
At the centre of the deadlock is agriculture.
The US has been pushing India to significantly open its domestic market by reducing tariffs on American farm goods like soybeans, wheat, corn, apples, ethanol, and dairy products, many of which are politically sensitive in India. Washington has also demanded easier market access for genetically modified (GM) crops, which New Delhi has long resisted due to health and regulatory concerns.
India, however, has refused to budge, citing the need to protect its small farmers and food security system, particularly the Minimum Support Price (MSP) regime that underpins rural stability and welfare.
According to a Times of India report, India has “hardened its position” and drawn clear red lines around its agricultural policy, even as other areas of the trade deal—such as energy and defence cooperation—have progressed more smoothly.
"There are two real challenges to concluding an initial agreement. First on the list is US access to the Indian market for basic agriculture products. India will need to protect its basic agriculture sector for economic and political reasons," Richard Rossow, who tracks India's economy at Washington's Center for Strategic and International Studies, told the BBC.
Rossow says India’s non-tariff barriers, especially the rising number of Quality Control Orders (QCOs), are a major hurdle in trade talks. The US sees these import rules, over 700 of them, as restrictive and costly, particularly for small Indian businesses.
Another sticking point is farm trade. While current India-US farm trade is modest at $8 billion, Washington wants to boost exports of maize, soybeans, cotton, and corn to reduce its $45 billion trade deficit with India.
The Indian government "doesn't want to be seen as surrendering the interests of farmers - a strong political group in the country," Reuters quoted a source as saying.
However, India is open to lowering tariffs on walnuts, cranberries and other fruits, along with medical devices, autos and energy products, the source said.
A US source familiar with the talks said that there were "indications that they are close" and negotiators have been told to prepare for a potential announcement.
The source added that "there's been intense and constructive effort to close a deal. I think both sides understand the strategic importance, beyond the economic importance, of closing a deal."
Why is agriculture so sensitive for India?
India’s farm sector supports over half the population. Any dilution in agricultural tariffs or changes in import policy could affect domestic crop prices, undercut Indian farmers, and trigger political backlash.
Moreover, allowing the US to dump heavily subsidised agricultural goods into the Indian market would upset the rural economy and undermine years of work toward self-reliance in food production.
What does the US want?
In addition to agriculture, the US is also seeking:
- Greater access for American dairy and processed food companies.
- Lower tariffs on electric vehicles, alcohol, and agro-biotech products.
- Reductions in non-tariff barriers, including product certification and labelling rules.
- Lower tariffs on soy oil, which India imports in large volumes.
Curiously, a recent Niti Aayog paper recommends tariff cuts on US farm imports - including rice, dairy, poultry, corn, apples, almonds and GM soya - under a proposed India-US trade pact. However, the Aayog later withdrew the controversial working paper - Promoting India-US Agricultural Trade Under the New US Trade Regime - after it drew sharp criticism from farmer groups and industry associations.
"If the US were to say 'no deal' if India does not include access on basic agriculture, then clearly American expectations were not set correctly. Any democratically-elected government will have political limits to commercial policy choices," says Rossow.
What does India want?
India is pushing for:
- A rollback of US tariffs on Indian steel, aluminum, and automobile components.
- Elimination of reciprocal tariffs the U.S. had imposed under Section 232.
- Tariff reductions on Indian textiles, pharmaceuticals, and auto parts.
- A more predictable trade regime, without sudden tariff escalations.
India also wants to ensure that any deal aligns with its long-term goals of Atmanirbhar Bharat (self-reliant India) and Viksit Bharat 2047, which prioritize domestic manufacturing and technological sovereignty.
Has Vietnam set a precedent?
Yes. In a surprise announcement, Trump claimed a deal had been reached with Vietnam, allowing US products zero-tariff access to Vietnamese markets, while Vietnam will pay a 20% tariff on its exports to the US and 40% on trans-shipped goods. India is under pressure to negotiate a similar outcome, but without compromising on food and farmer interests.
What happens if there’s no deal?
If the July 9 deadline passes without an agreement:
- India faces restoration of suspended tariffs, hurting key exports like aluminum, pharmaceuticals, and textiles.
- Trade tensions could escalate, affecting bilateral cooperation in strategic sectors such as defence, tech, and energy.
- Negotiations may continue under a more confrontational tone, potentially spilling into global forums like the WTO or G20.
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