USA–India Trade Deal Paused Over Agricultural Imports & Tariff Disputes

Talks on an early-stage USA–India bilateral trade deal have been paused, primarily due to disagreements over agricultural tariffs. India remains determined to shield staple crops, while the U.S. is pushing for market access on farm and dairy goods, causing a critical impasse.

What’s Causing the Pause?

• The U.S. is urging reductions in Indian tariffs on agricultural imports like nuts, dairy, and grains
• India has categorized crops into non-negotiable (e.g., wheat, rice), very sensitive (e.g., apples), and liberal items such as nuts—offering tariff flexibility only on the latter
• New Delhi is resisting lowering duties on staples, citing farmer protections and political sensitivities

Timeline & Context

• Negotiations have progressed since April’s 90-day pause on U.S. reciprocal tariffs, set to expire in early July
• Initial trade talks—focused on industrial goods and non-tariff barriers—were productive, but agriculture remains the most sensitive topic
• Officials now expect at least six more months of negotiations, pushing past tariff pause deadlines

Why Agriculture Is a Dealbreaker

1. Farmer Safeguards: India prioritizes tariffs on staples like rice and wheat to protect rural incomes
2. Economic Stakes: U.S. agri-exports to India reached nearly $2B in 2024, while India exported over $5 B in farm goods to the U.S.—with shrimp, nuts, and rice leading the way
3. Regulatory Barriers: The U.S. is also targeting India’s MSP, GM-import restrictions, and dairy protocols

A Dual-Track Strategy

India’s think tank, NITI Aayog, recommends a “dual-track” approach:

• Reduce duties on high-value, non-sensitive agricultural goods.
• Maintain safeguards like tariff-rate quotas or floor prices for essentials

Economic & Strategic Implications

• Export Vulnerability: Without a deal, up to $66B of Indian exports could face renewed U.S. tariffs
• Market Access Gains: India may offer tariff relief on goods such as almonds, pistachios, lentils, oats, while continuing resistance on staples
• Broader Framework: Leaders are targeting a first-phase trade deal by autumn 2025, aiming to double bilateral trade to $500B by 2030 moneycontrol

What Happens Next

• Tariff pause expires in July; both sides face pressure to either reach terms or risk trade disruptions.
• Talks to focus on balancing farm concessions with U.S. market openings for Indian goods and services.
• Qualified phasing of agricultural tariff cuts may offer a compromise, crafting a partial deal before full agreement.