India and US Near Interim Trade Deal to Avert Tariffs Amid Strengthening Bilateral Ties

India is poised to finalize an interim trade agreement with the United States as early as this week, aiming to prevent steep tariffs announced by former President Donald Trump. According to sources familiar with the ongoing discussions, the deal represents a key milestone toward a comprehensive US-India trade pact and would be one of the first of its kind involving a major American trade partner.

The interim agreement is expected to lay the foundation for a broader bilateral trade deal, which both countries aim to complete in phases—starting with a significant first tranche by autumn.

Tariffs Threat Looms

India currently faces proposed US tariffs of up to 26%, among the highest imposed on any large economy. These duties are part of Trump’s “Liberation Day” tariff plan, introduced on April 2. To avoid their enforcement, Washington has set a deadline of July 9 for new trade agreements to be in place.

Final Discussions Underway

Rajesh Agarwal, head of the Indian negotiation team, was in Washington on Monday to finalize the deal’s details. Meanwhile, Indian Foreign Minister S. Jaishankar is expected to hold high-level talks with US Secretary of State Marco Rubio this week, during a separate diplomatic summit in Washington.

Sources say the emerging agreement could exempt India’s key agricultural sectors—including wheat and dairy—from new US tariffs. These sectors are not only politically sensitive but also economically vital, supporting over 80 million workers, most of whom are small-scale farmers.

Energy and Market Access

In a strategic move to reduce India’s trade surplus—which stood at $41.2 billion for FY 2024-25—New Delhi has agreed to increase imports of US natural gas. Both countries have also settled on tariff reductions across thousands of traded goods.

As part of a long-term vision, India and the US have pledged to double bilateral trade to $500 billion by 2030, a commitment made during Prime Minister Narendra Modi’s February visit to Washington.

Agriculture: A Sensitive Topic

Despite US lobbying efforts for greater market access, India continues to protect its dairy and agricultural industries. The government has successfully shielded these sectors in past negotiations, including ongoing talks with the European Union.

Cultural and religious considerations also play a role. Many Indians avoid dairy products sourced from cows fed with cattle byproducts, making certain US imports unacceptable for devout Hindu consumers.

Still, India has agreed to import specific US agricultural products, such as fruits and nuts, as part of the compromise.

Momentum in India’s Trade Policy

Modi’s administration has taken a more aggressive stance on global trade in 2025. After signing a landmark UK trade agreement in May, India is also pursuing a long-delayed pact with the European Union, targeting completion by year-end.

Beyond trade, US-India relations have strengthened across defense, technology, and diplomacy, partly driven by shared strategic interests in countering China. The US continues to encourage India to purchase more American-made weapons, aiming to further balance the trade relationship.

However, tensions persist. Last month, Modi’s government rebuked Trump after he claimed credit for defusing a brief India-Pakistan conflict and offered to mediate over the Kashmir dispute—a highly sensitive topic in Indian foreign policy.

Outlook

As trade negotiations enter the final stretch, both countries are signaling optimism. On Monday, White House Press Secretary Karoline Leavitt confirmed that trade agreements with India were in the finalization stage. “You’ll be hearing from the president and his trade team very soon,” she said.