Despite months of high-level dialogue, the India-US trade agreement has remained tantalisingly out of reach. Yet recent remarks by US Secretary of Commerce Howard Lutnick offer hope. Speaking at an event hosted by the US-India Strategic Partnership Forum on Monday, Lutnick said both sides had “found a place that really works,” hinting that the agreement might be wrapped up before a crucial July 9 deadline—when a 90-day pause on American reciprocal tariffs is set to expire.
Lutnick’s optimism marks a shift in tone, as he acknowledged India’s urgency to conclude negotiations early and avoid a looming 26% tariff hike. “India is trying hard to be one of the earlier countries,” he noted, signalling rare momentum in what are usually years-long trade negotiations. A US trade delegation is expected in New Delhi later this week to accelerate the process.
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However, while the timeline may have compressed, the core issues—US tariffs on steel and aluminium, India’s hesitation on agricultural market access, and intellectual property concerns—remain unresolved. The next few weeks may determine whether a mutually beneficial compact can emerge or whether underlying frictions will again derail progress.
Steel tariffs a stumbling block
The latest flashpoint is Washington’s rejection of India’s notice at the World Trade Organisation (WTO), which proposed retaliatory action against the steep 25% US tariffs on Indian steel and aluminium. India has argued these duties are equivalent to safeguard measures—used when imports threaten domestic industries—but the US maintains they were imposed under Section 232 of its domestic law, citing national security concerns.
In a formal communication dated May 23, the US accused India of mischaracterising the tariffs, stating explicitly that they are not safeguards but national security actions. This hardline position has reinforced New Delhi’s scepticism, especially as Washington pushes for deeper access to India’s agricultural markets while keeping its own heavily protected.
Rising tariffs, shrinking patience
Matters escalated further last week when President Donald Trump called for doubling US import tariffs on steel to 50%. Indian exporters, who have already lost nearly $5 billion in market value due to the original 25% tariff, now face the possibility of steeper losses.
The US has flatly refused to discuss these tariffs under the WTO’s Agreement on Safeguards, arguing the measures are not subject to its purview. This stonewalling has significantly narrowed India’s options at the multilateral level, even as Indian exports to the US in FY2025 touched $4.56 billion across iron, steel, and aluminium categories.
Ajay Srivastava of the Global Trade Research Initiative (GTRI) believes India must now consider its remaining options. One path is to initiate a broader WTO dispute under the General Agreement on Tariffs and Trade (GATT), arguing that the US is using national security as a cover for economic protectionism. But history offers little comfort—Washington has routinely ignored unfavourable WTO rulings on Section 232.
Another approach is retaliatory tariffs, mirroring responses by the EU, Canada, and China. However, this raises the risk of escalation, legal retaliation, and further erosion of trust. A third, more strategic option is leveraging the ongoing Free Trade Agreement (FTA) talks to press for a fairer deal—one that recognises India’s concerns while pushing back against American exceptionalism.
The agricultural trade trap
Nowhere is this asymmetry starker than in agriculture. For years, the US has sought greater access to India’s agricultural sector—a sector that supports more than half of India’s workforce and underpins rural livelihoods. But India is rightly cautious. The American farm economy is heavily subsidised, capital-intensive, and export-oriented. Opening Indian markets to such competition risks flooding them with cheaper imports of soybeans, corn, dairy, and poultry—products where domestic producers lack price parity or technological scale.
This is not just an economic concern but a political one. India’s farmers remain a formidable electoral constituency, and liberalising agricultural trade without sufficient safeguards could trigger social and economic backlash. The government’s decision to walk away from the Regional Comprehensive Economic Partnership (RCEP) in 2019 was guided by similar fears—chiefly, the threat to the domestic dairy industry from New Zealand and Australia.
IP demands and farmer autonomy
Equally worrying are the intellectual property (IP) demands that often accompany US trade negotiations. Past FTAs pushed by Washington have sought stronger patent protections around seeds and agricultural biotechnology. If such provisions are included in an India-US FTA, they could give agribusiness giants like Monsanto disproportionate control over India’s seed systems.
This would erode traditional farming practices and force Indian farmers into expensive, patented input cycles—undermining food sovereignty and worsening rural debt. Other developing nations that signed similar agreements have witnessed diminished farmer autonomy and adverse environmental outcomes.
Learning from ASEAN FTA
India need not look far for cautionary tales. The ASEAN Free Trade Agreement, implemented in 2010, liberalised trade with agricultural exporters like Thailand, Vietnam, and Indonesia. While the deal boosted overall trade, it dealt a blow to Indian farmers—particularly in palm oil, rubber, and spice-producing regions. Imports surged, prices fell, and domestic producers struggled to compete.
A 2019 NITI Aayog study found that India’s trade deficit with ASEAN doubled from $5 billion in 2011 to $21.8 billion by FY19. The lack of preparedness—be it in infrastructure, supply chains, or farmer credit access—left India vulnerable. Worse, ASEAN countries often imposed non-tariff barriers (NTBs) on Indian exports, using sanitary and phytosanitary (SPS) standards to restrict entry, while India was unable to reciprocate.
The US also maintains stringent SPS norms and product certifications, making market access a two-way challenge. Without reciprocal easing of these restrictions, India risks a repeat of the ASEAN FTA imbalance.
India-US trade: Strategic caution the way forward
As FTA talks resume, India must defend sensitive agricultural sectors—dairy, oilseeds, pulses—while demanding meaningful access for Indian exports, especially fruits, vegetables, and processed foods. Concessions must be contingent on demonstrable gains.
More importantly, the government must consult farmer unions, cooperatives, and agribusiness stakeholders before signing any deal. These negotiations cannot be conducted in silos. Trade liberalisation that weakens the rural economy may win applause abroad, but it risks losing trust at home.
With the July 9 deadline fast approaching, time is no longer a neutral variable—it is a strategic asset. India must continue to push for an early tranche that shields it from retaliatory tariffs while ensuring its long-term interests are not compromised in haste. For Washington, the moment is equally critical: a fair and forward-looking deal with India could strengthen supply chains, bolster Indo-Pacific cooperation, and enhance credibility in trade diplomacy.
But a deal rushed under pressure risks repeating past mistakes. India cannot afford to barter away its farm sector, IP autonomy, and trade balance for temporary tariff relief. Negotiators must work with surgical precision—anchoring the talks in realism, reciprocity, and political economy.
A fast-tracked agreement may be possible, but it must be forged with care. Because what is at stake is not just $4.5 billion in steel and aluminium exports, but the strategic balance between access and self-reliance in India’s economic future.