India and the United States are on the brink of finalising a comprehensive trade agreement, overcoming decades of complex challenges on bilateral trade issues. It will profoundly transform the economic landscape between the two nations, fostering deeper trade ties and cooperation. This is significant since the U.S. is India’s largest trading partner.
The terms of reference of this landmark Bilateral Trade Agreement were finalised in April during U.S. Vice President JD Vance’s maiden visit to India.[1] The goal is to take bilateral trade to $500 billion by 2030 from $132 billion currently, for 2023-24 as per official statistics by the Ministry of Commerce and Industry.
The negotiations have gained momentum since Prime Minister Narendra Modi’s visit to Washington D.C. in February. They are focused on addressing long-standing concerns like tariff reductions, intellectual property rights, and access to markets which, once resolved will significantly enhance the competitiveness of both countries in the global marketplace.
Beyond economic implications, this trade agreement also carries substantial strategic importance. Trade ties will enhance geopolitical alignment, paving the way for joint initiatives in critical areas such as technology, defense, and environmental sustainability.
India and the U.S. began negotiating a trade deal during the first tenure of the Donald Trump administration. At that time, both sides agreed to fast-track the trade talks and signed “phase one” of a comprehensive bilateral trade agreement. It never materialised even as both sides signed a number of pacts on defence, energy and telecom during Trump’s first visit to India in 2020. Instead, the strategic relationship was elevated to the level of a Comprehensive Global Strategic Partnership.[2]
The unfinished business resumed with some urgency in January this year, when Trump’s second term commenced.. The implementation of his stringent tariff policies that have come to be known as the ‘Liberation Day’ tariffs of April 2 has also acted as a catalyst, accelerating talks in a manner unprecedented compared to previous administrations. Commerce and Industry Minister Piyush Goyal has so far made four trips to the U.S., 17-20 May being the latest one, when he met U.S. Commerce Secretary Howard Lutnick and U.S. Trade Representative Jamieson Greer, to hammer out a deal expected to be ready by June-end. This was followed by a high-level team of U.S. trade negotiators led by assistant U.S. Trade Representative Brendan Lynch that arrived in New Delhi on 4 June for a two-day visit.
The backdrop of the India-U.S. negotiations is set against an on-going conflict between Trump and his country’s trade judicial system. On May 28, the Court of International Trade ruled that the International Emergency Economic Powers Act of 1977, the legislation under which the U.S. President imposed his ‘Liberation Day’ tariffs were “unconstitutional’ and did not guarantee him “unbounded authority” to impose the tariffs on partner countries.[3] The day after, an appeals court reinstated the tariffs.
India’s Commerce Minister Goyal says India “does not interfere or comment on the internal matters of other countries” And that the BTA talks are “well on track”. But there are hurdles to overcome On Feb 10, India complained to the World Trade Organization (WTO) against the U.S.’s imposition of 25% tariffs on Indian steel, aluminium, automobiles and auto components. Ignoring the move, the U.S. has double the rates to 50% on Indian steel and aluminum which has effectively led to the slowing down of talks for the trade deal.
Broadly, the proposed BTA is being negotiated on the basis of “comparative strengths” of both countries, according to Piyush Goyal on the sidelines of an event held in New Delhi recently.Greer said that the trade pact with India will help the U.S. address the “serious lack of reciprocity in the trade relationship with India” by “opening new markets for American goods and addressing unfair practices that harm American workers.”[4]
The broad contours of the deal have India likely slashing tariffs on a wide-range of American goods ranging from American cars, wines and spirits, agricultural and dairy products and energy goods. In some categories of agricultural products and industrial goods, the tariff may be brought down to zero. A May 2025 report by government think tank NITI Aayog suggests that India maintain a “favourable environment” when it comes to exporting items to the U.S., as that will enable India “to achieve larger gains in exports.”
NITI Aayog suggests that India can negotiate with the U.S. for greater market access for its high-performing exports such as shrimp, fish, spices, rice, tea, coffee and rubber, which account for nearly $5.75 billion in export revenues annually. Exports of these products can be expanded through duty waivers or reducing duties under the tariff rate quotas (TRQs) mechanism.
“Given that the U.S. is India’s largest trading partner and a key destination for Indian agri-exports, India must prepare a strategic response that protects local producers and promote overall domestic interests without escalating trade conflicts” the report stated..
While the fine print has not been made public, back-room talk has it that as much as 90% of American goods will get preferential access to the Indian market under the proposed BTA. This is significant as the European Union and Australia with which New Delhi is negotiating similar comprehensive deals, will be sure to ask for similar concessions.
Already, India has taken a similar measure with the United Kingdom under the India-UK Free Trade Agreement, where India will reduce tariffs on 90% of UK exports, with 85% becoming completely duty-free within 10 years. Tariff reduction takes place in a gradual manner. So in the first 10 years, 80% tariff lines or UK exports will be covered, thereafter on 90% of the items the tariff items will take place. On its part, the UK will eliminate tariffs on 99% of Indian exports, covering nearly 100% of the trade value.[5]
With the U.S., India has sought reduction of duties on the export of chemicals, textiles, gems and jewellery, leather goods and garments, among others. U.S. total goods trade with India stood at $129.2 billion in 2024. U.S. goods exports to India in 2024 stood at $41.8 billion, up 3.4% from 2023, and it imported $87.4 billion in 2024, 4.5% higher from the year earlier. Therefore, the U.S. goods trade deficit with India also increased to $45.7 billion in 2024, a 5.4%increase over 2023, according to the USTR.
In order to maintain its robust presence in the American markets, the U.S. will have to withdraw the 26% reciprocal tariff imposed, down to the 10% baseline rate. So far the U.S. has not relented, causing a major stumbling block for the Indian negotiators. In contrast, the U.S. has signed a temporary trade deal with China under which both sides have lowered the reciprocal tariffs imposed on each other. This has facilitated the entry of Chinese goods once again into the U.S. markets, impacting the demand for similar Indian goods.
India has already began purchasing huge volumes of crude from the U.S. – $63 billion in March 2025, which was 11.49%higher compared to the previous year.
A global transformation is taking place in real time, and the BTA is an important part of it. It will also help India shed its old trade skepticism and bring India into the new global trade regime on more modern terms. New Delhi’s diplomats and bureaucrats currently have their hands full with multiple trade delegations awaiting negotiations and finalised agreements. The India-U.S. bilateral moving into a position of high expectations and trust in both the strategic and commercial realms, should help to bring about positive outcomes.
Nayanima Basu is Adjunct Fellow, and an author.
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References:
[1]https://www.gatewayhouse.in/stepping-up-the-trade-talk-with-vance.
[2]https://www.mea.gov.in/bilateral-documents.htm dtl/32421/Joint_Statement_Vision_and_Principles_for_IndiaUS_Comprehensive_Global_Strategic_Partnership
[3]https://www.cit.uscourts.gov/sites/cit/files/25-66.pdf
[4]https://ustr.gov/about/policy-offices/press-office/press-releases/2025/april/ambassador-greer-issues-statement-trade-negotiation-progress-india
[5]https://www.ey.com/en_in/insights/tax/how-will-the-uk-india-fta-redefine-economic-ties-between-the-two-nations#:~:text=The%20UK%2DIndia%20Free%20Trade%20Agreement%20allows%20elimination%20of%
20tariffs,it%20provides%20to%20both%20countries.