India-U.S. trade deal: Will it happen?

In the recent times, India-US trade negotiations had gathered momentum, post President Trump’s imposition of reciprocal tariffs. Officials had been hinting at fast track negotiations going on, which were likely to be concluded by July 9, 2025, when deadline of pause on reciprocal tariffs ends.

But suddenly the news surfaced that India and the US trade talks are faced with hurdles. Major soar points in these talks are US demands for market access for genetically-modified (GM) crops, relaxed regulations on medical devices and data localization. On the other hand India is seeking exemptions from US tariffs on steel, automobiles, and pharmaceuticals, and also exception from reciprocal tariffs and other measures.

Reports indicate that the negotiators have hardened their stands, due to which, the talks have faced a significant roadblock.

India USA Free Trade Agreement has been under discussion since 2017. But so far this agreement has not seen the light of the day, not even a limited one. Many times, this agreement was seen so near, but suddenly some roadblocks had been identified and talks went into doldrums. Last such incident occurred in 2020. In the media the reports were coming in that India-USA FTA is going to be signed, and United States Trade Representative’s (USTR) visit to India was on cards but suddenly we heard that USTR has canceled his visit to India and since then there was no talk of India-US FTA ever.

In the past four months since President Donald Trump has taken over the reins of power in USA, these talks have once again started surfacing. It so happened, because President Donald Trump decided to impose, reciprocal tariffs on its trade partners, such that the tariffs were now being decided not on the basis of WTO agreed bound rates for USA, but on the whims of President Trump, on so called idea of reciprocity. USA was seen as pressuring its trade partners to reduce tariffs imposed by them on US products and enter into trade agreement with USA, to avoid the imposition of reciprocal tariffs by USA. Talks had been going on and it was being reported in media that India-US FTA is on cards and can be signed any day. However on Friday, June 13 reports started flowing, that India-US trade agreement has once again hit a big roadblock. At the time, it seems, perhaps India-US trade agreement will not happen any time soon.

This roadblock comes from India’s stand that it cannot allow import of GM food products, against US pushing for opening India’s market for the US GM food products; and our insistence on data localization against US businesses lobbying for not allowing servers for hosting data in India and a few other issues.

History of Hiccups

Around 2006–08, the idea of an India–US FTA was first floated amid broader talks of strengthening strategic and commercial ties. However, no formal negotiations were launched due to major differences. It’s notable that US wanted more access to Indian markets, especially in retail, agriculture, and more concessions on IPR, beyond what was permitted under WTO, what we term as TRIPS plus. But due to India’s stand that this agreement may cause a loss of policy space, especially in agriculture, pharmaceutical, IPR and investment rules, the talks never began on India-US FTA, even a limited one, till 2017.

Till 2017, momentum for trade talks remained subdued under Obama administration, and focus shifted to sector-specific cooperation, not a full FTA. India remained cautious about US demands on Intellectual Property Rights (IPR), Investor-state dispute settlement (ISDS), Market access in multi-brand retail and e-commerce. Though, US businesses kept raising concerns over India’s tariffs and regulatory hurdles.

During Trump’s first stint in power, 2017–2020, US administration took a more aggressive stance and India’s Generalized System of Preferences (GSP) benefits (duty-free access for Indian exports) were withdrawn in 2019. The US gave the argument of lack of reciprocal access and high tariffs. At that time, discussions started, focused on a ‘mini trade deal’, covering a limited number of goods and services. But even that did not materialize, as mentioned earlier, and talks abruptly came to an end, when USTR suddenly called off his visit to India then.

After President Joe Biden, took charge in 2020, India–US ties have taken a strategic direction, and there were developments on Indo-Pacific, Quad, and tech alliances. Trade issues were being addressed incrementally, not through an FTA. India–US Initiative on Critical and Emerging Technologies (ICET) (2023) signals closer ties in areas like AI, semiconductors, defence production, and clean energy.

What Agreement or No Agreement Means for India?

While many experts have been raising concerns about template of India-US trade agreement, we need to understand the asks of the US, and how sacrificing any or more concerns, may hurt India, needs to be debated.

We need to know that since many US tariffs target products not exported by India, reciprocal duties might not significantly harm Indian exporters.

According to calculations, between 2017–2024, India captured around $38 billion in US export share at China’s expense, suggesting India could further benefit from diverted trade flows under US tariff pressure, on China, and this is expected even without a trade deal with US.

We can try to boost exports of labor‑intensive sectors through trade deals, which could help manufacturing industries like textiles, electronics, auto parts, and solar equipment, gain scale and access U.S. markets, aligning with India’s Make in India push.

But if this could be achieved through a limited trade deals, that can be a much better option, as a full-fledged free trade agreement may lead to demands on government procurement, agriculture subsidies, IP rights (like patent “evergreening”), and liberalized data flows, the areas, India has long resisted. Another downside of the full fledged trade deal is that US might insist India to increase imports of energy and defense goods—potentially worsening India’s trade position unless counterbalanced. Therefore, it would be appropriate, if India offers zero to zero tariffs, such that it exchanges tariff reductions in low-risk categories, excluding sensitive sectors. At the same time we need to avoid binding agreements on services, procurement, IP, and agriculture.

In the proposed India-US FTA, two major contentious issues are of Agriculture and MSMEs. We know that agriculture supports more than 45 percent of India’s workforce, and any agreement which impacts the agriculture, can jeopardize the livelihood and food security of the nation. We understand that Indian agriculture cannot compete with US agriculture, as competing with US agriculture means competing with US government, which gives huge subsidies to the US agriculture, and therefore allowing imports of agricultural produce in India from US may impact Indian agriculture hugely. In the meanwhile, surprisingly NITI Aayog has come out with a Working Paper, suggesting lowering of tariffs on the import of agricultural products such as genetically modified (GM) soybeans and corn from the US and simultaneously protecting sensitive sectors like poultry and dairy. Working paper prepared by by NITI Aayog advocates opening the Indian market to specific agricultural products that do not face direct competition from local producers, such as pistachios, almonds, and off-season apples, which do not impact domestic production.

This report has raised huge furore amongst the farmers’ organizations, who maintain that these suggestions if accepted may be hugely damaging. Similarly, there is a need to protect the interest of the small scale sector in the agreement. Data sovereignty, and IPR are also no less important. It seems that US is asking for much more than what we can give.

We need to understand that whether there is an agreement with US or not, exports from India to US will continue unbated, and there is no reason, why we give concessions beyond a point, hurting the interest of Indian agriculture, small scale, industry, and future growth of the economy.

Views are personal. The writer is Ex-Professor, PGDAV College, University of Delhi and National Co-Convenor of Swadeshi Jagran Manch.