US, India Edge Toward Trade Deal That May Lower Tariffs Below 20%

The United States and India are reportedly close to finalizing an interim trade agreement that could reduce proposed tariff rates to below 20%, according to sources familiar with the negotiations. The development would position India more favorably than other Asian economies currently navigating U.S. tariff threats.

Unlike several countries that have received formal tariff notices in recent days, India is expected to avoid such a letter. Instead, a joint statement announcing the interim deal is anticipated, sources said, with both sides agreeing to continue discussions toward a broader agreement due later this year.

Initial proposals had placed tariffs at 26%, but the emerging deal may lock in rates below the 20% threshold, while leaving room for future negotiation. Although the exact timeline for the announcement remains uncertain, India appears to be making progress ahead of the August 1 deadline when many U.S. tariffs take effect.

India Moves Proactively Amid Global Uncertainty

India, one of the first nations to request formal trade talks with the Trump administration this year, is seeking to secure a more favorable framework than that offered to other countries. Vietnam, for instance, was caught off guard by a 20% import tariff, while some Southeast Asian nations such as Laos and Myanmar face rates as high as 40%.

Despite New Delhi’s early engagement, friction has surfaced. U.S. President Donald Trump has raised concerns over India’s involvement in BRICS and has threatened additional duties. Still, both sides have remained engaged, with a team of Indian negotiators expected in Washington soon.

Contentious Issues Remain

Key sticking points include U.S. demands that India open its markets to genetically modified crops, which New Delhi has rejected due to concerns for its agricultural sector. Disagreements also persist on non-tariff barriers in agriculture and regulatory frameworks in the pharmaceutical industry.

India’s Ministry of Commerce and Industry did not comment on the ongoing discussions. Similarly, U.S. trade officials have yet to issue a formal response.

Markets responded positively to the news. The iShares MSCI India ETF, which manages over $10 billion in Indian equity exposure, pared earlier losses following reports of a potential deal.

If finalized, India would become only the third country to reach a tariff agreement with the Trump administration this year, joining the United Kingdom and Vietnam.