Cautious optimism prevails over India-US trade deal, New Delhi continues to negotiate with Washington

There is cautious optimism surrounding the trade deal between India and the US, following a seeming thaw in bilateral relations. Both US President Donald Trump and Prime Minister Narendra Modi have expressed optimism about the early conclusion of the agreement.

Officials in New Delhi have underlined that India has not abandoned trade talks with the US, which will continue with the overall deadline of completion by this October or November in line with the joint statement of PM Modi and US President Trump. “It is not as if negotiations have been called off. They will continue and India continues to engage with the US for a trade deal,” sources underlined.

However, it is hoped that the US will remove the 25% penalty on India, giving a breather to Indian exporters. In the interim, the government has also been working on a relief package for exporters although various quarters have indicated that a trade deal between the two countries is likely.

It also remains to be seen how India tackles the US demand of opening up crucial sectors of dairy and agriculture that remain a no-go for India in trade deals.

Ajay Srivastava, founder, Global Trade Research Initiative (GTRI) underlined that India must remain steady. “Negotiations were already underway when India faced 25% tariffs, with hopes of a cut to 10%. Instead, Trump added another 25% penalty linked to Russian oil,” he pointed out, adding that unless the US drops these tariffs—which looks unlikely given the Supreme Court case—no trade negotiation can realistically move forward. “Trump’s warm words may simply be a tactic to weaken India’s resolve in pursuing multipolar ties with Russia and China,” he said.

US President Donald Trump, early on Wednesday announced on a post on Truth Social that India and the US are continuing negotiations to address the trade barriers between the two nations. “I look forward to speaking with my very good friend, Prime Minister Modi, in the upcoming weeks. I feel certain that there will be no difficulty in coming to a successful conclusion for both of our Great Countries,” he said.

In response, PM Modi also expressed confidence that trade negotiations will pave the way for unlocking the limitless potential of the India-US partnership. “Our teams are working to conclude these discussions at the earliest,” he said.

The statements by the two leaders on early Wednesday comes after weeks of pressure from Washington DC on New Delhi to cut tariffs on US exports and stop oil purchases from Russia in order to seal the proposed trade deal.

The US has also imposed the highest tariff of 50% on India, which includes a 25% penalty tariff for procuring crude oil from Russia. According to reports, the US has also asked the European Union to impose 100% tariff on India and China, which are the two large importers of Russian crude oil, as part of a strategy to pressure Russia to end the war with Ukraine.

A report by Kotak Institutional Equities cautioned that a prolonged stand-off can have deep implications for India’s economy and invite more ‘penalties’ from the US, going by recent comments from various US political leaders. “India and the US have had deep economic relationships for a long time with large bilateral trade in both goods and services, huge investment from US investors (both FPI and FDI and a large number of US companies operating in India,” it said.

However, India and the US have not had strong political engagement historically with India choosing a non-aligned stance notwithstanding more cooperation in the past few years (both are part of The Quad) and the US being more aligned with Pakistan historically, it further noted.