India and the United States are actively exploring the possibility of an interim trade arrangement centred on goods, aiming to secure swift, reciprocal benefits as discussions progress towards a comprehensive bilateral trade agreement. Officials are working towards finalising the initial phase of this larger pact by the autumn of this year.
Discussions at the sectoral level have commenced, with further in-person engagements anticipated from late May. This follows recent high-level talks in Washington last week involving India’s chief trade negotiator and the Assistant US Trade Representative for South and Central Asia.
During these meetings, delegations delved into a range of issues, including tariffs on goods and various non-tariff measures. The stated objective was to chart a course for concluding the first stage of a mutually advantageous, multi-sector trade agreement by September-October 2025, specifically identifying opportunities for early achievements. An interim arrangement concerning trade in goods could materialise as part of these early gains if both sides reach an agreement.
Initially, the focus remains on goods, with India highlighting non-tariff impediments in sectors such as marine products. Formal first-round negotiations are expected to begin following the planned May meetings.
These deliberations are taking place during a crucial window, as the US has temporarily suspended additional tariffs of 26 per cent on Indian goods until July 9. Both nations are keen to leverage this period to advance the trade discussions.
Senior US officials have expressed optimism regarding the progress. The US Treasury Secretary recently indicated that India is likely to be among the first nations to finalise a bilateral trade accord with the United States, potentially averting the application of reciprocal tariffs proposed by the current US administration. He noted positive momentum in negotiations with several Asian trading partners, including India.
The US had initially announced the additional 26 per cent tariff on Indian goods effective April 2, but this was suspended for 90 days on April 9. A baseline tariff of 10 per cent, however, remains in effect.
India is seeking reduced duties for labour-intensive sectors such as textiles, gems and jewellery, leather products, garments, plastics, chemicals, shrimp, oil seeds, and certain agricultural products like grapes and bananas within the framework of the proposed agreement. Conversely, the US is looking for tariff concessions on items including certain industrial goods, vehicles (particularly electric vehicles), wines, petrochemicals, dairy products, and agricultural goods such as apples and tree nuts.
The foundational terms of reference for the bilateral trade agreement have been finalised, encompassing approximately 19 chapters. These chapters cover a broad spectrum of issues, including tariffs, trade in goods and services, rules of origin, non-tariff barriers, and customs procedures.
The United States has repeatedly raised concerns regarding certain non-tariff barriers encountered by American goods in the Indian market. Similarly, Indian products face comparable issues in international markets, including the US, European Union, China, Japan, and Korea.
According to a recent US report on foreign trade barriers, India maintains various non-tariff measures. These include prohibitions on certain imported items, requirements for non-automatic import licenses for specific products, and import restrictions through government trading monopolies subject to cabinet approval on timing and quantity. The report also highlighted technical barriers to trade imposed by India, such as mandatory quality control orders and compulsory domestic testing and certification for equipment.
The United States has consistently been India’s largest trading partner, a trend that continued for the fourth consecutive year in 2024-25, with bilateral trade valued at $131.84 billion. The US accounts for a significant portion of India’s total goods exports and bilateral merchandise trade. India has maintained a trade surplus with the US, which stood at $41.18 billion in goods in 2024-25 and has shown an increasing trend in recent years, a matter the US has raised concerns about.
