Indian expert’s hopeful of finalizing initial trade agreement with U.S. “very soon”

For weeks and months, the US and India have been engaged in quiet negotiations to finalize a trade deal. The possibility of an agreement seems to have gained momentum after the so-called “Liberation Day” tariffs announcement on April 2 by US President Donald Trump which levied tariffs on imports from most countries of the world. India is keen to reduce the new tariffs or even gain exemption from them.

Some Indian pundits expect that the interim trade agreement with the US will be finalized “very soon”, even hinting that it could be as early as next week at the G-7 summit in Canada where both US President Trump and Indian Prime Minister Narendra Modi would be present.

In contrast to the criticism openly voiced by some countries impacted by the tariffs, India resorted to quiet diplomacy to convey to the Trump administration its concerns over the tariffs. Indeed, India’s Commerce and Industry Minister, Piyush Goyal, who has visited Washington DC several times in the past, was in DC in the third week of May, to give what an Indian official described as the “final push” to the trade negotiations. During his May visit, Goyal met with US Commerce Secretary Howard Lutnick twice, hoping to get exemption from the 26% reciprocal tariff on Indian exports to the US.

Prior to Goyal’s visit, Indian Prime Minister Narendra Modi met with Trump in February 2025 when they announced the launch of the US-India COMPACT (Catalyzing Opportunities for Military Partnership, Accelerated Commerce & Technology) for the 21^st Century.

US goals in a Deal with India

The US goals include “increasing market access, reducing tariff and non-tariff barriers, and negotiating a robust set of additional commitments to ensure long-term benefits”, according to the US Census Bureau. US-India bilateral trade was estimated around $ 129.2 billion in 2024, with the U.S. recording a $ 45.7 billion goods trade deficit in 2024.

According to USTR, India’s average tariff is 17%, while the U.S. applied tariff is 3.3%. India’s average tariffs on agricultural products are 39% while the U.S. applied average tariff on agricultural products is 5%. The U.S. says that India also maintains “technical barriers to trade, regulatory barriers, and restrictions on access to the market in the services, industrial and agricultural sectors, thus also reducing U.S. exports to India”.

Indians say that bilateral trade can surge to $500 billion – “Mission 500”, as some Indians call it - by 2030 but Trump’s tariffs would be a hurdle to achieving this target, particularly in sectors such as automobiles, agriculture, etc. According to Citi Research analysts, India could lose up to $7 billion annually because of the proposed tariffs. During his visit, Piyush offered to reduce tariffs, including on automobiles and chemicals while resisting pressure on agricultural products which would hit millions of Indian farmers.

Indian food and agricultural exporters, particularly of shrimp and dairy products, fear Trump’s tariffs could hit their business. A report by the Global Trade Research Initiative (GTRI) highlights that tariff differentials on these products could reach nearly 40%.

India has already offered to lower tariffs on bourbon whiskey from 150% to 100%; high-end motorcycles were reduced from 50% to 30%. It also offered to review other tariffs, increase energy imports and purchase more arms from the US.

US bourbon whiskey suppliers, concerned over the slowdown in the US market, want to tap the world’s largest whiskey market by volume, though Indian whiskey brewers – and now UK Scotch whiskey suppliers following the UK-India free trade agreement – will be closely watching the changes unfolding in this $4 trillion plus economy and “goldmine of a market”, as one Indian wine merchant called it.

Hardly known in India until the late 1990s, Jack Daniel’s bourbon whiskey is considered today as the largest-selling American whiskey, commanding some 3% market share of the premium and imported whiskey segment.

USTR negotiators in New Delhi

India-US trade talks entered their final phase with U.S. negotiators visiting New Delhi starting June 5. India offered to reduce tariffs on US agricultural goods and defense equipment but, in return, wanted the US to lower reciprocal tariffs and better access to the US market for labor-intensive sectors such as textiles and leather products.

Reports suggest that the US generally wants better market access for exports of oil, defense equipment, soybeans, corn, whiskey and automobiles.

The US wants to increase its share of India’s defense market, which in the past relied mainly on Russian defense equipment supplies. Washington’s calculation is that defense equipment – so-called “big ticket items” – would help boost bilateral trade to the targeted $ 500 billion by 2030 and, at the same time, reduce US trade deficit with India. While praising U.S.-India ties, Lutnick recently stated at the U.S.-India Strategic Partnership Forum in Washington DC there were "certain things that the Indian government did that generally rubbed the US the wrong way”, referring to India’s purchases of military gear from Russia.

But Lutnick acknowledged that talks had reached a good point and “…you should expect a deal between the United States and India in the not-too-distant future because I think we found a place that really works for both countries”.

India, which is a major supplier of steel and aluminum products, is equally disappointed with Trump’s May 30 announcement to double the existing 25% tariffs on steel and aluminum imports from June 4.

Trump originally invoked this provision in 2018 to set the 25% tariff on steel and 10% on aluminum, raising tariffs on aluminum to 25% in February 2025. In 2024-25, India exported $4.56 billion worth of iron, steel and aluminum products to the US.

While visiting Switzerland after his US visit, Goyal said that the US trade deal would be finalized, adding that both India and U.S. should reach for “the low-hanging fruit”, alluding to issues that can be resolved.

India also asked the US to revoke the 10% baseline tariffs imposed by the Trump administration, but the US side refused, arguing that even Britain faced these tariffs under the recent US-U.K. trade agreement.

Both sides reportedly are keen to finalize the initial deal by the end of June, possibly on the sideline of the G7 Summit in Canada where both Trump and Modi will be present. The 90-day suspension of reciprocal tariffs ends on July 9. It remains to be seen if they would sign the deal by then.