India and the United States are on the verge of finalizing an interim trade deal that could see tariffs on Indian goods capped below 20%, a significant relief as the US imposes steep new levies on many trading partners. The move comes as part of ongoing negotiations aimed at strengthening bilateral trade ties while providing India with more favorable terms than many of its Asian peers.
The backdrop to these talks is a wave of tariff hikes announced by the US administration. President Donald Trump has unveiled new duties ranging from 20% for countries like Vietnam and the Philippines to as high as 40% for Laos and Myanmar, with threats of blanket tariffs of 15% to 20% on most partners who have not secured special agreements. India, however, has not received a formal tariff demand letter, signaling ongoing diplomatic engagement and the potential for a more favorable outcome.
The interim agreement is expected to set a baseline tariff below 20%, down from the initially proposed 26%. This would position India among a select group of nations with special arrangements, alongside the UK and Vietnam, though India is pushing for even better terms than Vietnam received.
The joint statement announcing the deal will likely include language allowing for continued talks on final tariff rates, giving both sides time to resolve outstanding issues before a broader, more comprehensive agreement is expected later in 2025. Unlike many countries that have received official notification of new tariffs, India’s ongoing negotiations have so far shielded it from immediate tariff hikes, buying time for further diplomatic maneuvering.
While the original July 9 deadline for a deal has passed, a new target of August 1 looms, after which reciprocal tariffs could take effect if no agreement is reached. Indian negotiators are expected to travel to Washington soon to finalize details, with both sides seeking to resolve remaining issues before a broader pact is announced later this year.