Navigating Trump Tariffs: Outlook For Bilateral India-US Trade Agreement

The "first phase" or the interim India-US trade deal is reportedly imminent, with both nations indicating they are very near to concluding the agreement.

While an exact signing date has not been announced, top officials from both countries expect a formal announcement soon.

President Donald Trump has expressed optimism that the US is "getting close" to a "fair trade deal" with India, indicating plans to reduce the current high tariffs '"at some point". At the swearing-in of his envoy to India, Sergio Gor, he said: "We're making a deal with India, a much different deal than we had in the past."

White House economic adviser Kevin Hassett indicated that the trade and tariff agreement is "close to the finish line", while also acknowledging the situation is complicated by India's continued, though recently reduced, trade in Russian oil.

From the Indian side, Commerce and Industry Minister Piyush Goyal stated that India is at an advanced stage of discussions with the US. He stressed that the deal will only be signed when it is "fair, equitable, and balanced" and safeguards the interests of domestic sectors, including farmers and fisherfolk. Commerce Secretary Rajesh Agrawal confirmed in mid-November 2025 that the first tranche of the bilateral trade deal is "more or less near closure" and will primarily focus on resolving reciprocal tariffs.

India's primary focus of the initial agreement is addressing the existing 50% US tariffs on Indian goods, which include a 25% "reciprocal" tariff and an additional 25% penalty related to India's past purchases of Russian oil. Reports suggest the tariffs on Indian goods may be reduced to a range of 12% to 19%.

The first phase of the deal is intended to be a foundation for a broader Bilateral Trade Agreement. The US has already granted tariff exemptions on 254 Indian agricultural products worth approximately $1 billion, including fruits, nuts, spices, tea and coffee.

The long-term goal for both nations is to more than double their bilateral trade to $500 billion by 2030. The deal is seen as a way to realign global supply chains and strengthen economic ties between the world's two largest democracies amid ongoing geopolitical shifts.

India has begun to significantly reduce its oil imports from Russia as part of a broader trade deal negotiation with the US. Major Indian refiners, including Reliance Industries and state-controlled companies like Mangalore Refinery and Petrochemicals Ltd and HPCL-Mittal Energy have reportedly stopped placing new orders for Russian crude from sanctioned entities for December delivery.

To compensate for the reduced Russian volumes, Indian refiners are increasing imports from traditional partners in the Middle East, as well as the US, Canada and other regions. While India continues to prioritise its energy security and the availability of affordable oil, its recent actions indicate a diplomatic pragmatism aimed at facilitating the trade deal and balancing its economic objectives with the US.

The progress on the trade deal now hinges on the US rolling back the "Russian oil" tariffs. As part of the negotiations, India may agree to duty-free imports of US soybeans and corn (for ethanol production) and potentially increase US energy (such as oil and LPG) and military equipment purchases. India remains firm on protecting its domestic sectors, including farmers and fishermen, and ensuring the deal provides a strategic advantage over competitors. 

A trade deal with the United States is expected to benefit India primarily by significantly increasing market access for Indian goods, attracting foreign investment, strengthening supply chains and boosting key export-oriented sectors.

Key benefits for India would cover many sectors. Tariffs on textiles and apparel could be slashed, making Indian products more price-competitive against those from rival nations like Bangladesh and Vietnam, and potentially leading to a 20-25% recovery in exports for that sector.

Sectors expected to gain the most include:

• Elimination or reduction of current high tariffs would restore price competitiveness and reignite demand from US buyers.

• Gems and jewellery is a labour-intensive sector, which is a critical area for potential tariff reductions to ensure greater market access.

• Increased access to the US market for auto components and industrial machinery would support the growth of these manufacturing industries.

• Indian exporters of items like spices, tea, coffee, and niche horticulture products could benefit from the rollback of US tariffs on specific items.

• The deal could also ensure long-term commitment and streamlined US FDA approvals for Indian generic drugs and medical products, re-solidifying India as a reliable supplier of pharmaceuticals.

• A stable and predictable trade environment resulting from the deal is expected to improve India's investment climate and attract more foreign institutional investor inflows, supporting the stock market and broader economy.

• The agreement would aim to strengthen supply chain integration, particularly in critical industries like semiconductors, advanced materials, and pharmaceuticals. This would help global manufacturers looking to diversify away from China to expand operations in India, boosting the "Make in India" initiative.

By reducing its own tariffs on certain US goods (e.g., specific agricultural products, energy), India would encourage domestic industries to become more efficient and innovative to manage import competition. The proposed India-US trade deal is expected to benefit the US by strengthening its strategic partnership with India, increasing market access for US goods and services, and expanding energy and defense sales.

The deal would cement the US as a key trading partner and turn trade from a point of friction into a pillar of cooperation, aligning with both nations' broader Indo-Pacific strategies. The deal would transform the relationship into a deeper strategic partnership, strengthening economic ties with a key Indo-Pacific ally and serving as a regional counterweight to China.

India has increased its purchases of US oil and liquefied petroleum gas, and the deal is expected to encourage a further shift away from Russian crude imports, benefiting US energy companies. Minister of Petroleum and Natural Gas Hardeep Singh Puri had announced on Nov. 17, 2025, that Indian PSU oil companies successfully concluded a one-year contract to import around 2.2 MTPA of LPG from the US Gulf Coast for the contract year 2026.

The US views India as a significant purchaser of American defence equipment and technology. Recent agreements include a potential large-scale purchase of MQ-9B drones and the joint production of GE F-414 jet engines, which support US jobs and technological cooperation.

The US seeks duty reductions and improved access for American products such as industrial goods, automobiles, wines, petrochemicals, dairy, and agricultural products like almonds, pistachios, and apples in India's large consumer market.

The India-US trade deal is highly important for both nations as a strategic and geopolitical tool to solidify their broader partnership and create a counterbalance to China's influence. Economically, the deal is crucial for significantly boosting bilateral trade, reducing tariffs, and integrating supply chains.

While the immediate economic benefits in terms of trade volume are substantial, the deal's most profound importance lies in cementing a long-term, multi-faceted strategic alliance between the world's two largest democracies. 

A trade deal will be a crucial pillar that supports the broader, multifaceted India-US relationship, providing the economic foundation necessary for a strong and enduring global strategic partnership.

The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.