India-America Relations / India-US trade deal expected before July 9, problem stuck in automobile sector

India-America Relations: The Indian delegation has recently returned from Washington to discuss an interim trade agreement with the US. The agreement is expected to be finalised before July 9, 2025, as the 90-day suspension period of retaliatory tariffs imposed by Donald Trump expires on the same day. The Indian delegation was led by Rajesh Agarwal, Special Secretary, Department of Commerce. However, discussions will still continue due to some unresolved issues in the agriculture and automobile sectors.

Issue of 25 percent duty in automobile sector

India has raised concerns over the 25 percent duty imposed by the US in the automobile sector. The duty was imposed on March 26, 2025, on passenger vehicles, light trucks and certain auto parts imported from India, and will be effective indefinitely from May 3, 2025. India has raised the issue in the World Trade Organization (WTO) safeguards committee and reserved the right to impose retaliatory tariffs on select US products in response to US steel and aluminum tariffs.

However, the US imports relatively less automobile components from India. In 2024, the US imported auto parts worth $89 billion globally, of which Mexico accounted for $36 billion and China $10.1 billion, while India's contribution was only $2.2 billion.

Challenges in the agriculture sector

In the agriculture sector, the US is demanding duty concessions on dairy products, apples, nuts and genetically modified crops. The sector is politically sensitive for India, and implementing any concessions would be challenging. India has not opened up the dairy sector in any of its free trade agreements (FTAs) and has taken a tough stand in granting duty concessions on US agricultural products.

Demands of both sides

India wants a complete exemption from the additional 26 per cent tariff imposed by the US, which was imposed on April 2, 2025, but is suspended for 90 days. On the other hand, the US is demanding duty concessions on certain industrial goods, electric vehicles, wines and petrochemical products. India wants duty concessions for its labour-intensive sectors such as textiles, gems and jewellery, leather, apparel, plastics, chemicals, shrimp, oilseeds, grapes and bananas.

Timing and significance of the talks

The Indian delegation was in Washington from June 26 to July 2, 2025. The discussions assume significance as the suspension period of retaliatory tariffs ends on July 9. Both sides are committed to finalising the deal before this date. Currently, the 10 per cent basic duty imposed by the US is still in force.