New Delhi, April 12, 2025 – India has agreed to negotiate a new trade deal with the United States, a move aimed at easing tensions sparked by President Donald Trump’s recent imposition of a 26% tariff on Indian imports. The announcement follows months of diplomatic efforts, with both nations seeking to strengthen economic ties and address a $45.6 billion trade deficit that the U.S. currently holds with India.
The decision to pursue a Bilateral Trade Agreement (BTA) was solidified after a February 2025 meeting between Trump and Indian Prime Minister Narendra Modi, where they launched “Mission 500,” an ambitious plan to double bilateral trade to $500 billion by 2030. Negotiations, which began in late March with a U.S. delegation led by Assistant Trade Representative Brendan Lynch visiting New Delhi, are set to focus on reducing tariffs and non-tariff barriers while enhancing supply chain integration. India has already offered to slash tariffs on over 50% of U.S. imports worth $23 billion, including bourbon, motorcycles, and electronics, as a goodwill gesture to avoid further trade penalties.
The stakes are high for India, which faces a potential $5.76 billion drop in exports due to the U.S. tariffs, according to the Global Trade Research Initiative. Key sectors like pharmaceuticals, jewelry, and textiles—major drivers of India’s $66 billion export market to the U.S.—are particularly vulnerable. Unlike its approach during Trump’s first term, India has opted not to retaliate with tariffs, instead prioritizing a deal that could secure better market access for its goods and services, especially in IT and pharmaceuticals.
The talks also carry a geopolitical undertone. Both nations aim to counter China’s economic dominance in the Indo-Pacific, with the U.S. viewing India as a critical partner in diversifying supply chains away from high-tariff countries like China (34%) and Vietnam (46%). India’s relatively lower tariff rate gives it a strategic edge, potentially positioning it as a supply chain hub for U.S. firms. However, challenges loom, as the U.S. is pushing for more concessions, and India must balance domestic interests, particularly in agriculture and electronics, where high tariffs protect local industries.
Foreign Secretary Vikram Misri emphasized the need for a “fair and balanced” trade relationship, noting ongoing discussions with U.S. Deputy Secretary of State Christopher Landau on reducing trade barriers. As virtual sector-specific talks are set to continue in the coming weeks, the outcome of this BTA could redefine U.S.-India economic relations and set a precedent for global trade negotiations amidst rising protectionism.
While optimism surrounds the talks, experts caution that political and economic differences could complicate the path to a deal. For now, both nations appear committed to finding common ground, with the hope of fostering growth and stability in an increasingly fragmented global economy.
