US-India trade deal: The United States is discovering, not without discomfort, that the world no longer revolves around it. President Donald Trump’s use of tariffs as a pressure tactic has not yielded predictable results. India, among others, is pushing back—especially when it comes to agriculture. While negotiations for a much-anticipated bilateral trade agreement have entered a crucial stage, New Delhi is firm in its refusal to allow greater market access to US agricultural and dairy products.
The next few days are critical. A July 9 deadline looms over the ongoing talks. If an agreement is not reached, the US is expected to reimpose a 26% reciprocal tariff on Indian exports—suspended since April. This would be in addition to the existing 10% baseline tariff already in place. But agriculture remains the biggest hurdle.
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Washington wants India to lower import duties on several agricultural goods, including apples, tree nuts, dairy, and genetically modified crops. These are sectors where US producers enjoy massive scale, mechanisation, and subsidies—and want access to India’s vast consumer base.
A politically charged sector
For India, the agricultural sector is not just about trade. It is about food security, political sensitivity, and rural livelihoods. With over 700 million people dependent on agriculture and slogans like Jai Jawan, Jai Kisan woven into the country’s political fabric, New Delhi is acutely aware that market liberalisation in this space carries electoral consequences.
Small land holdings, low productivity, and the dominance of subsistence farming make Indian farmers particularly vulnerable to competition from large-scale foreign producers. Major cooperatives like Amul have consistently opposed opening the dairy sector to foreign competition. Successive Indian governments have steered clear of offering agricultural concessions in any free trade agreement signed so far.
India’s current tariff regime on farm products ranges from zero to 150%, while the US itself maintains prohibitive tariffs on certain products such as tobacco (350%). So, accusations of asymmetry may not entirely hold water.
US-India trade deal: A fundamental divide
The US is driven by its interest in expanding agricultural exports, which touched $176 billion in 2024—about 10% of total merchandise exports. This is consistent with its broader strategy of market expansion for subsidised, mechanised agricultural goods. In contrast, India’s agricultural economy is still largely unorganised, undercapitalised, and exposed to the vagaries of the monsoon and market volatility.
For New Delhi, therefore, agriculture is not a tradable commodity but an essential support system for the rural economy. As Ajay Srivastava of the Global Trade Research Initiative (GTRI) has argued, opening up the sector to heavily subsidised imports would expose millions of Indian farmers to predatory pricing by global agribusiness giants, most of whom control the lion’s share of global food trade.
The WTO leeway and strategic choices
India’s current stance on protecting agriculture is well within the ambit of WTO rules, which allow countries to shield sensitive sectors on grounds of food security and rural employment. But even within these bounds, New Delhi is weighing the cost of compromise. One possible route is to follow the model of the US-UK mini trade deal, announced in May, which avoided controversial concessions in agriculture but opened up space for tariff adjustments in industrial goods.
In India’s case, that could mean selective market access through tariff-rate quotas (TRQs) or modest tariff reductions on products such as ethanol, almonds, apples, raisins, olive oil, wine, and spirits. These are sectors where the economic impact on Indian farmers may be relatively muted.
However, caution is warranted. Agricultural goods make up less than 5% of US exports to India. Conceding too much in this politically fraught sector could provoke a domestic backlash while offering limited economic gain. The better trade-off may lie in allowing concessions in industrial goods—such as automobiles, another long-standing American demand—where the political costs are lower and the domestic base more resilient.
As both sides push to finalise the first tranche of the BTA by September or October, the outcome may hinge on who blinks first. If India yields, it risks undermining farmer incomes and political goodwill in the hinterland. If it stands firm, it may lose an opportunity to recalibrate relations with a key strategic partner.
But for now, New Delhi appears to be signalling that its farmers are not for sale—at least not on Washington’s terms.