Deal or no deal? India races with trade talks amid Trump tariff threat, proposes retaliatory rates on US steel, aluminium

India, US talk trade amid Trump tariff threat: Amid crunch talks for a Bilateral Trade Agreement (BTA) with the US as the Trump tariff threat looms, India has proposed retaliatory tariffs under WTO rules in response to the US "safeguard" tariffs on steel and aluminium. The first phase of a BTA, which could be a ‘mini-deal’ is expected to be inked by September-October. But that will cross the August 1 deadline given by US President Donald Trump for countries to reach trade deals with the US, or face tariffs. What is the status of India-US trade deal? How will India be affected if no trade deal is reached? Here is what you should know:

What is the status of India-US trade deal?

Even as he sent out letters to several trading partner countries, Trump continued to say that a deal is likely with India.

The two sides are racing to finalise the BTA as soon as possible, having missed the deadline of July 9, the date till which Trump had frozen the tariffs.

An Indian commerce ministry team is preparing for another round of negotiations in Washington on the trade deal, according to indian media reports.

India's offers and differences with US on tariffs and trade

India has offered zero tariffs on 60 per cent of US imports worth $23 billion. New Delhi has also promised preferential access for 90 per cent of US goods, as well as cuts on items like bourbon whiskey and Harley-Davidson bikes.

The US insists on lower tariffs on agriculture and dairy products. It wants access to the Indian market for the controversial Genetically Modified or GM crops. On these issues, India has remained firm in protecting the interests of the Indian farmers. India has also reportedly resisted a US demand to reduce its 'Made in India' origin rule from 60 per cent to 35 per cent.

What tariffs could hit India if no trade deal is reached by August 1?

Trump has expressed optimism about a trade deal with India. It is quite possible that he would extend the deadline for the same with India ‘on good faith’.

But if a deal is not reached, India could face a 10 per cent 'universal tariff' on all imports from India, as imposed by the US president in April. In addition, India could face an extra 17 per cent reciprocal tariff. The overall tariff rate, therefore, could be 27 per cent.

Which sectors of India are facing US tariffs?

Perhaps the biggest import tariffs could be on steel and aluminium, which could be raised up to 50 per cent. Indian auto imports could face 25 per cent tariff, though Indian parts coming via Canada and Mexico might get exemptions.

Also exempted, as of now, are pharmaceutical, semiconductor and copper imports from India. Certain minerals and energy products critical to the US economy might also be exempt.

How will India-specific tariffs affect Indian exporters?

The key sectors from India that could be hit by tariffs are gems, jewellery, marine products, electronics and auto parts.

Textile imports from India could face up to 27 per cent tariff. Still, Indian textile and apparel might get a relative advantage, given that China, the main exporter to the US, is facing 145 per cent tariffs.

US has a trade deficit with India and Trump wants to change it

Indian exports to the US stood at around $129 billion in 2024, with pharmaceuticals alone accounting for $13 billion.

The US has a trade deficit of $45 billion with India, which is a major grievance of Trump. He is taking the tariff route to reduce this gap.

The Trump administration estimates US tariff revenues of around $34.8 billion per year from India, assuming there is no trade drop.

Prognosis: What will happen to Indian exports to the US if no deal is reached?

There will be high costs on some key Indian goods as mentioned above. Tariffs could reduce India's competitiveness and lead to a decline in Indian exports to the US, as they'd be less attractive for US importers. Despite deep concessions offered by India, differences remain on agricultural trade.

Both nations are aiming to reach 'Mission 500', a goal of $500 billion in bilateral trade by 2030. The coming weeks would be critical in deciding the future of India-US trade.