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Trade talks between India and the U.S.: Key issues ahead of the July 9 deadline

Sources in the Indian government said that trade talks between India and U.S. had hit a snag over disagreements regarding duties on auto components, steel, and farm products. This has dashed hopes of reaching a temporary deal before President Donald Trump's deadline of July 9 to impose reciprocal import tariffs.

Here are some of the main issues:

HURDS TO A TRADE DEAL

India's dependence upon agriculture, a major source for rural employment, has made it difficult for New Delhi, despite the risks posed by subsidised U.S. agricultural products, to accept U.S. requests for steep tariff reductions on corn, soy, wheat, and ethanol.

Fearing the competition of U.S. companies, domestic auto, pharmaceutical and small-scale businesses are pushing for a slow opening of protected sectors.

The U.S. wants greater access to agricultural products and ethanol. They cite a significant imbalance in trade, as well as expanded market access for automobiles, pharmaceuticals and alcoholic drinks, and medical devices.

"Lack of Reciprocity"

India has offered to reduce tariffs on a variety of farm products and give preferential treatment to U.S. companies, as well as increase energy and defence purchasing. However, Indian officials are still waiting for substantive proposals from Washington, given Trump's unpredictable trade policies.

Indian exporters are still concerned by the U.S. tariff increases, which include a 10% base tariff on average, a 50% tariff on steel and aluminum, and a 25% tariff on auto imports. A proposed reciprocal duty of 26% is also on hold.

ASSESSMENT OF STRATEGIC ALIGNMENT

Indian policymakers view the U.S. over China as their preferred partner, but are cautious to compromise policy autonomy in international affairs.

The U.S. has been India's biggest trading partner for many years. It is also a major supplier of technology, energy and defence equipment.

Tensions over Pakistan

India is wary of deeper strategic relations after Trump's perceived tilt towards Pakistan during the recent conflict between neighbours raised doubts regarding U.S. reliability.

GROWING INDIAN IMPORTS TO U.S.

New Delhi believes that exports will grow in the future, particularly in garments, electronics, and engineering goods, thanks to the tariff advantage it has over Vietnam and China.

India's exports of goods to the U.S. will reach over $87 billion by 2024. This includes pearls, gemstones, and jewellery, worth $8.5 billion; pharmaceuticals worth $8 billion; and petrochemicals worth around $4 billion.

Services exports, led by IT and professional services, were valued at $ 33 billion in 2024.

With over $68 billion cumulatively in FDI from 2002 to 2024, the U.S. also ranks third among India's investors.

US Exports to India

U.S. manufacturing exported to India will be worth nearly $42 billion by 2024. However, there are high tariffs on these products. These range from 7% for wood products and machinery, to 15% to 20% for footwear and transport equipment and up to 68% on foods.

According to a White House fact sheet published recently, the average tariff applied by the U.S. on farm products was 5% as opposed to India's 39%. (Reporting and editing by Raju Gopikrishnan; Manoj K. Kumar)

(source: Reuters)