India and the United States are set to engage in the second round of in-person negotiations on trade agreements in Washington, led by Indian chief negotiator Rajesh Agarwal.
According to sources, the Bilateral Trade Agreement (BTA) is a significant priority for India, as it aims to resolve trade-related issues and establish long-term stability in commercial relations between the two nations.
As part of a broader ‘reciprocal tariff’ hike by the US, duties have been imposed since March 12, including a 25% tariff on automobiles effective from April 3. India views the BTA as a crucial platform to address such trade disputes.
The BTA negotiations are expected to cover all tariffs, regardless of the product, as per trade talk protocols. India will also push to include duties on steel and aluminum within the scope of these discussions.
India and the US are major trading partners, with bilateral trade increasing from $51.6 billion in fiscal year 2021 (FY21) to $86.51 billion in FY25. The US is India’s largest trading partner, while India ranks seventh for the US.
Bilateral trade grew by 11.6% in FY25, reaching $86.51 billion from $77.52 billion in FY24. However, imports from the US increased modestly by 7.42%, from $42.20 billion to $45.33 billion, during the fiscal year ending on March 31. As a result, India recorded a trade surplus of $41.18 billion with the US in FY25, up from $35.32 billion the previous year, marking a 16.6% increase.
Key issues for discussion in the upcoming talks include digital tax regulations, tariff reductions, and non-tariff barriers. India has expressed concerns about a US demand for market access for its dairy products, citing differences in feeding practices between the two countries.
Industry experts have suggested that the Indian government should not only work towards eliminating reciprocal tariffs but also strive for better market access in sectors like textiles, apparel, and labor-intensive industries. They also advise India to protect the interests of its farmers.
On the other hand, the steel industry has expressed concerns about the additional 25% duty on steel, which is impacting Indian manufacturing, even as some shipments are already in transit. They propose a zero-for-zero tariff on steel and aluminum to create a level playing field.
However, trade research body Global Trade Research Initiative (GTRI) believes that the impact of the Trump administration’s 25% tariffs on India’s automobile sector is likely to be limited. The report also suggests that some segments in the automobile sector may even see opportunities.
GTRI founder Ajay Srivastava warns that if India decides to reduce tariffs on passenger car imports to appease the US, it could lead to unintended consequences, as demonstrated by Australia’s experience in the late 1980s when its automobile manufacturing industry collapsed after the country slashed auto import tariffs from 45% to 5%.
