India and US Negotiate Mini Trade Deal, Focusing on Agricultural Trade

India and the United States are close to finalizing a "mini trade deal" centered on goods, with an announcement expected soon, per government sources. This interim agreement seeks to enhance bilateral trade relations and establish a foundation for a comprehensive free trade agreement (FTA) expected later in 2025. The deal comes after the trade tensions sparked by the US imposing a 10% tariff on Indian exports on April 2, 2025, which disrupted India’s trade dynamics with its largest export market.

Key Features of the Deal

India grants market access to select US agricultural products, including corn, apples, almonds, walnuts, and avocados, which are not widely produced domestically, thus minimizing competition with local farmers. In contrast, India excludes sensitive sectors like wheat, maize, and genetically modified (GM) crops from the agreement to protect its agricultural economy.

The US, in return, reduces additional 26% tariffs on Indian exports, providing relief to industries such as textiles, leather, pharmaceuticals, and jewelry, which constitute a significant portion of India’s $86.51 billion exports to the US in FY25. The agreement retains the 10% baseline tariff introduced by the US but includes tariff reductions on US automobiles, addressing a key US demand for better market access for its automotive sector. This balanced approach aims to boost trade flows while addressing immediate tariff concerns, setting a cooperative tone for future FTA negotiations.

India prioritizes protecting its dairy sector, which supports over 80 million smallholder farmers and contributes significantly to rural livelihoods. In a June 30, 2025, interview with the Financial Express, Finance Minister Nirmala Sitharaman emphasized that agriculture and dairy remain critical priorities for India, describing them as non-negotiable sectors in trade talks. A State Bank of India (SBI) analysis estimates that opening the dairy market to US imports could result in annual losses of Rs 1.03 lakh crore for Indian farmers, with a potential 15% drop in milk prices threatening the sector’s economic stability.

India also rejects US requests to allow dairy products derived from animals fed blood meal and GM crops, citing food safety, cultural, and religious concerns. To enforce these standards, India maintains stringent veterinary certification requirements for dairy imports, ensuring that products come from animals fed plant-based diets. The US has challenged these certifications at the World Trade Organization (WTO), labeling them as trade barriers, but India defends them as essential for consumer safety and market integrity.

India’s chief negotiator, Rajesh Agarwal, Special Secretary in the Ministry of Commerce and Industry, leads a delegation in Washington, D.C., starting July 14, 2025, with a critical round of talks scheduled for July 16. The negotiations address a July 9 deadline set by the US for suspending reciprocal tariffs, which was extended to August 1 to allow more time for dialogue.

The US seeks expanded market access for its agricultural, dairy, automotive, and pharmaceutical sectors, while India, under Commerce Minister Piyush Goyal, focuses on safeguarding its farmers, small industries, and labor-intensive sectors. Goyal has repeatedly stressed that any trade agreement must prioritize India’s domestic interests, particularly in agriculture, which employs nearly half of the country’s workforce. The negotiations reflect a delicate balance, with both sides working to resolve differences while maintaining diplomatic momentum toward a broader FTA.

Bilateral trade between India and the US reaches $132 billion in FY25, with India exporting $86.51 billion in goods, including textiles, pharmaceuticals, and gems, and importing $45.33 billion, primarily in oil and machinery. The mini trade deal supports India’s agricultural exports, such as organic food, spices, and fresh produce like mangoes, litchis, and bananas, with potential revenues exceeding $3 billion. It also encourages US investments in cold storage infrastructure, precision farming technologies, and cost-effective agricultural inputs, which could enhance India’s agricultural productivity.

The agreement aligns with India’s strategic shift toward diversifying its import sources, evidenced by a 270% increase in US oil imports in the first four months of 2025, reducing reliance on traditional suppliers amid global supply chain uncertainties. By addressing sanitary and phytosanitary (SPS) barriers, the deal could further boost India’s exports of Ayush products and generic medicines by $1-2 billion, strengthening its position in the US market.

The US disputes India’s dairy certification requirements at the WTO, arguing they restrict trade, while India challenges US tariffs on steel and auto parts, reflecting ongoing trade frictions. The mini deal excludes India’s most sensitive sectors, such as dairy and certain crops, but these issues will resurface in FTA negotiations. Critics, including the Global Trade Research Initiative (GTRI), caution that a comprehensive FTA could impact India’s agriculture, food security, and small retailers, particularly if US dairy and GM products gain broader access.

Union Agriculture Minister Shivraj Singh Chouhan, on July 7, 2025, reaffirmed that India’s farmers remain the priority in trade talks. The mini deal requires final approval from the Prime Minister’s Office, which is closely monitoring the negotiations to ensure alignment with national interests. The agreement’s success depends on maintaining this balance as both nations prepare for more complex FTA discussions.

On April 2, 2025, President Donald Trump introduces a 10% tariff on all US imports and a 26% tariff on Indian exports to address perceived trade imbalances, particularly India’s high tariffs on US goods like automobiles (70% compared to the US’s 2.5%). On April 9, Trump suspends country-specific tariffs for 90 days to encourage trade negotiations, warning of a 27% tariff increase for India by August 1 if no deal is reached. These tariffs impact India’s $4.56 billion steel and aluminum exports to the US, with reports of order cancellations affecting Indian foundries.

The policy also disrupts global markets, with India’s stock indices declining after the tariff announcement. The mini trade deal aims to mitigate these tariff effects, particularly by reducing the 26% reciprocal tariff, while supporting India’s export-driven industries and maintaining access to the US market, which accounts for a significant share of India’s trade surplus.

(Rh/Eth/RS)