In February 2025, Indian Prime Minister Narendra Modi and US President Donald Trump agreed to negotiate ‘a mutually beneficial, multi-sector’ India–US Bilateral Trade Agreement (BTA) by the fall of 2025. The leaders touted ‘an integrated approach to strengthen and deepen bilateral trade.’
These initial aspirations were codified two months later. In the terms of reference for the BTA negotiations, the United States stated that its goals included increasing market access by reducing India’s tariff and nontariff barriers.
The decision to launch the BTA negotiations itself was a significant milestone in India–US relations. The two countries have been unable to find common ground to initiate bilateral trade negotiations, despite the growing proximity of their governments. This growing proximity was evident in the US–India Comprehensive Global and Strategic Partnership, which was described as the ‘defining partnership of the 21st century’. Bilateral economic ties have also strengthened with the United States emerging as India’s largest export destination, accounting for nearly a fourth of its total exports during the first half of 2025.
Despite these favourable tidings, the United States remained the only major economy with which India had not engaged in bilateral trade negotiations.
While initiating the BTA negotiations, the United States focused on pointing out that its exports faced significant trade barriers in India. The United States argued that India’s average applied tariff was 17 per cent, almost five times higher than that of the United States, contributing to a US merchandise trade deficit of US$45.7 billion vis-a-vis India in 2024. The Trump administration saw the BTA as an opportunity to simultaneously increase market access for its products in India and to readjust its trade imbalance with one of its largest trade partners.
Even before the decision to launch the BTA, India sought to mollify US market access concerns by reducing tariffs on a host of items. It reduced tariffs on two of US’ iconic products — Harley Davidson motorcycles and Bourbon whiskey. Tariff reductions on a wide range of manufactured products were also on the cards emulating concessions India had made in its Comprehensive Economic and Trade Agreement with the United Kingdom. Under this agreement, India agreed to open its market for passenger cars for the first time, having steadfastly refusing to do so in all its previous free trade agreements.
But these market access offers did not placate the United States, for it had targeted India’s domestic market for major agricultural commodities. Trump referred to the relatively high tariffs on agricultural products, particularly rice in husk, while announcing his decision to impose reciprocal tariffs. US Commerce Secretary Howard Lutnick also complained that India would not let America sell a bushel of corn. Lutnick has argued that Trump understands that the best way to expand US farmers’ access to global markets is by negotiating deals with countries that currently block their products.
The Trump administration’s push for greater market access for agricultural products in the BTA reflects the electoral logic of Trump’s base. In the 2024 Presidential election, almost 78 per cent of farming-dependent counties supported Trump. US farm lobbies representing corn soybean and wheat interests, have also been strongly lobbying the US government for access to the Indian market.
The Trump administration’s push to pry open India’s agricultural market has been the major sticking point in the BTA negotiations. India has not included major agricultural commodities in any free trade agreement negotiated thus far, for two compelling reasons. One is that a majority of India’s workforce continues to depend on agriculture and allied activities like dairying for their livelihoods. Another is that more than 86 per cent of India’s farmers operate on small and marginal holdings, those that are less than 2 hectares. It is obvious that these farmers would face unequal competition if US agri-business was allowed to operate in India.
As the pressures from the Trump administration to lower agricultural tariffs grew, Modi stepped in to make a commitment to India’s farmers. During his Independence Day address, he declared that ‘for farmers, fishermen and livestock rearers, Modi will always stand as a wall of protection’.
Despite such rhetoric, given strong US interest in accessing to India’s vast agricultural market, there are signs of a thaw in India–US relations. In early September, Trump revealed that his administration was continuing discussions to address trade barriers with India. Modi responded to President Trump’s overture by expressing confidence that the bilateral trade negotiations ‘will pave the way for unlocking the limitless potential of the India-US partnership’.
While there are indications that India and the United States could work towards cutting the Gordian Knot, the two governments would do well to extend the earlier timeline for concluding the trade deal by the fall of 2025, which should give them enough time to iron out India’s sensitivities.
Biswajit Dhar is a former professor at Jawaharlal Lal Nehru University.
https://doi.org/10.59425/eabc.1759874400