The US has consistently made a range of tall demands, from steep reductions in agricultural tariffs, to amendments in key legislation, including patents and other forms of intellectual property rights
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The bilateral trade agreement (BTA) between India and the US has been on the anvil ever since an interim agreement between the two countries was announced earlier this year. Though the deal remained elusive, over the past month both governments have sounded quite optimistic. Recently, Commerce Secretary Rajesh Agrawal stated that the interim agreement was “ready” and would be signed at the “right time”. But he also indicated that the government wanted to ensure that the US provides India “comparative advantage over its competitors”.Two features of the BTA sets it apart from all the free trade agreements (FTAs) India has negotiated thus far. First, the US has consistently made a range of tall demands, from steep reductions in agricultural tariffs, to amendments in key legislation, including patents and other forms of intellectual property rights. Secondly, during the negotiating process, President Donald Trump’s policy flip-flops have posed challenges, which indicate the nature of uncertainties India could be up against while implementing the BTA.In early February, India and the US reached a framework for an Interim Agreement, the first step towards a BTA. India agreed to eliminate or reduce tariffs on all US industrial goods and a wide range of food and agricultural products, but the US gave itself the right to impose ‘reciprocal tariff’ rate of 18 per cent on India’s exports. India also agreed to “address long-standing non-tariff barriers to the trade in US food and agricultural products”. This language almost suggested that India had agreed to drop its restrictions on imports of genetically modified crops from the US. India also expressed its intent to purchase $500 billion of a range of US products, including energy and technology products, over the next five years. This was the first time India had agreed to discuss a trade deal on terms that were grossly unequal.It is remarkable that while deepening economic ties through FTAs, India has secured guarantees for foreign capital inflows from its partners. In sharp contrast, Indian companies have assured investments of over $20.5 billion in the US, with the pharmaceutical companies agreeing to invest $19.1 billion.In addition, the Adani Group has pledged to invest $10 billion in energy security and resilient infrastructure projects.The US Supreme Court, in February, ruled that Trump’s ‘reciprocal tariff’ was illegal, but weeks later, the United States Trade Representative (USTR) announced unilateral investigations under Section 301 of the US Trade Act against 60 countries, including India, for their failure to effectively enforce a prohibition on importation of goods produced with forced labour. India is among the countries on which the USTR has imposed additional import duties of 10 per cent, at par with that on Pakistan and Bangladesh.Section 301 investigationsIndia is also a target of a second set of Section 301 investigations for maintaining “structural excess capacity” in seven sectors — textiles, health, construction goods, automotive goods, solar module, petrochemicals, steel and “other industries” — covering a significant share of India’s exports. However, the USTR has not specified the level of additional import duties.This completely lopsided structure of talks being held in an atmosphere of threats, was built into the BTA right at the outset. After all, the decision to negotiate the BTA was taken in the backdrop of President Trump’s “America First” trade policy, which stated that the US would “negotiate agreements on a bilateral or sector-specific basis to obtain export market access for American workers, farmers, ranchers, service providers”. The emphasis was clear; the US would prioritise the interests of its own stakeholders, without guaranteeing reciprocal advantages to partners.Alongside, the Trump Administration would investigate the causes of US’ “large and persistent annual trade deficits in goods … and to undertake a review of, and identify, any unfair trade practices by other countries”. Thus India, a country with whom the US ran “persistent” trade deficits, was also under a scanner.The announcement of the BTA coincided with the launch of Donald Trump’s “Fair and Reciprocal Plan”, to counter “non-reciprocal trading arrangements” by imposing ‘reciprocal tariff’ on trade partners that did not give the US “reciprocal treatment”.Trump explained his intent giving India’s example, among others: while US’ average tariff on agricultural goods was 5 per cent, India’s average tariff was 39 per cent. India also charged 100 per cent tariff on US motorcycles, while the US only charged a 2.4 per cent tariff on Indian motorcycles.Donald Trump had, thus, underlined US’ objective of getting even with India on tariffs using the BTA.Trump had pointed out months ago that US’ average tariff was among the world’s lowest at 3.3 per cent, while India’s was significantly higher (17 per cent). The US imposed 2.5 per cent tariff on passenger vehicles, but India’s duties were much higher (70 per cent). For rice in the husk, US’ tariff was 2.7 per cent as against India’s 80 per cent. Using tariff comparisons, Donald Trump had conveyed his message to India that he was seeking sizeable reduction in India’s tariffs, including on a sensitive product like rice. The US was clearly eyeing a share of India’s rice market. Today, farmers from across the country are protesting against the BTA.The announcement regarding the implementation of ‘reciprocal tariff’ (July 31) saw India’s exports to the US facing additional tariffs of 25 per cent, the highest in South Asia. India’s textiles and clothing, the second largest product group among its exports to the US, thus faced price disadvantage vis-à-vis similar products from other South Asian countries.Additionally, tariffs of 25 per cent were imposed on India for “directly or indirectly” importing crude oil from Russia, which became effective from late-August 2025. This was an unprecedented affront on India’s energy security policy. This has been withdrawn, only to have new impositions or threats.ABTA conducted in this ambience of threat has little chance of being fairly negotiated.The writer is Development Economist and former Professor, JNUPublished on July 30, 2026
