India, US ministerial-level trade pact talks this week

US Trade Representative Jamieson Greer and Commerce and Industry Minister Piyush Goyal will hold two-day talks this week on the first phase of the bilateral trade agreement.

“For the US trade deal talks, tomorrow my counterpart is coming to Delhi,” Goyal told reporters in Mumbai.

The meeting followed chief negotiator-level discussions on the pact held earlier this month (June 2-4) here in the national capital.

Commerce Secretary Rajesh Agrawal has recently stated that the discussions between the two ministers are expected to be centred around giving final touches to the framework deal.

On June 5, Goyal said India and the US are moving towards closing all the open ends of the interim trade agreement, and both sides are likely to execute the “very, very vibrant” first phase of the BTA by the middle of next month.

IMPORTANCE OF THE MIDDLE OF NEXT MONTH: The 10 per cent temporary tariff imposed by the US on all its trading partners on February 24, 2026, for 150 days will expire on July 24. After that, the MFN (most favoured nation) tariffs will come into force on goods imported by the US.

The temporary tariff is levied over and above the MFN duty. So before July 24, the US has to put in place a new tariff regime.

For that, the US is conducting two Section 301 investigations against a number of countries, including India. This is the only legal mechanism through which the US can impose new tariffs of any magnitude.

SECTION 301 PROBES: In March, the US Trade Representative (USTR) launched two unilateral Section 301 of the Trade Act of 1974 investigations against a number of countries, including India, over excess capacity and failures to eradicate forced labour in global supply chains.

On June 2, the USTR proposed imposing 12.5 per cent tariffs on 54 countries, including India, for allegedly failing to prohibit the import of goods produced with forced labour. The measure remains a proposal and has not yet been finalised. Interested parties can submit requests to appear at hearings and summaries of testimony by June 22. The USTR is scheduled to hold hearings on July 7.

The report of the second probe is awaited.

WHY THIS PROBE: On February 20, the US Supreme Court ruled against US President Donald Trump’s sweeping reciprocal tariffs, which were imposed under the 1977 International Emergency Economic Powers Act (IEEPA). India was facing a 50 per cent tariff. Because of the ruling, the US has to replace the sweeping reciprocal tariffs with temporary duties.

So, Trump announced 10 per cent tariffs on all countries for 150 days, starting February 24.

INDIA-US BTA FRAMEWORK: On February 7, India and the US issued a joint statement finalising the contours or framework of the first phase of the BTA or an interim trade deal.

According to that framework, the US had agreed to reduce tariffs on India to 18 per cent from 50 per cent. It had removed the 25 per cent tariffs on Indian goods for buying Russian oil and was to cut the remaining 25 per cent to 18 per cent under the pact. But the US Supreme Court ruled against these tariffs.

As the tariff landscape changed in the US, both sides are relooking at the agreement’s framework.

The February joint statement on the framework has a clause that, in the event of any changes to the agreed-upon tariffs of either country, the US and India agree that the other country may modify its commitments.

Under the agreed framework, India proposed to eliminate or reduce tariffs on all US industrial goods and a wide range of food and agricultural products, including dried distillers’ grains (DDGs), red sorghum for animal feed, tree nuts, fresh and processed fruit, soybean oil, wine and spirits, and additional products.

New Delhi has also expressed its intentions to purchase USD 500 billion of US energy products, aircraft and aircraft parts, precious metals, technology products, and coking coal over the next five years.

INDIA DEMANDS A COMPARATIVE ADVANTAGE ON TARIFFS: When the framework of the first phase of the bilateral trade agreement (BTA) was finalised, India had a comparative advantage over its competitor countries, such as ASEAN nations (Indonesia, Malaysia, Singapore, Thailand, Philippines, Brunei, Vietnam, Laos, Myanmar, Cambodia), Sri Lanka, Pakistan and Bangladesh.

Under the framework, the US had announced an 18 per cent tariff on Indian goods. At that time, tariffs on India’s competing countries ranged from 19 to 20 per cent. But now, all countries face the same 10 per cent additional levy.

Sources have stated that it is important that India should get an advantage over its competitor nations on the tariff front in the trade pact with the US.

COMPARATIVE ADVANTAGE MEANS: For example, if the US imposes an 18 per cent tariff on imports from India and a 20 per cent tariff on goods from Vietnam, India gains a tariff advantage over Vietnam in the American market.

This makes Indian products relatively more competitive compared to similar goods exported by Vietnam.

Take an example of a shirt. If an Indian shirt and a Vietnamese shirt are both priced at USD 100 before tariffs, the Indian shirt would cost USD 118 in the US after the tariff is applied, while the Vietnamese shirt would cost USD 120.

The lower tariff burden would make the Indian product cheaper for American buyers. As a result, importers and retailers in the US may find Indian goods more attractive, potentially helping Indian exporters increase their market share. This relative edge is often referred to as a comparative or tariff advantage in international trade.

TRADE: The US was the second-largest trading partner of India in 2025-26.

India’s outbound shipments to the US grew marginally by 0.92 per cent to USD 87.3 billion during the last fiscal year, while imports increased 15.95 per cent to USD 52.9 billion. The trade surplus declined to USD 34.4 billion in 2025-26 from USD 40.89 billion in 2024-25.