India races to wrap up free trade deals as clock ticks on Trump’s tariff window

The pause is a “golden opportunity" to diversify India’s export markets and reduce dependency on the US, especially as the global trade landscape gets increasingly volatile, the officials said. The pause applies to all countries except China – a move that reignited tensions between Washington and Beijing, signalling the start of what many are calling Trade War 2.0.

On 8 April, Mint reported that India was seeking a suspension of the 26% tariffs imposed by the US on Indian goods until a Bilateral Trade Agreement (BTA) is finalized by September-October 2025.

Topping India’s current trade agenda are free trade agreements (FTAs) with the European Union, United Kingdom, New Zealand, Australia, Peru and the Asean group of South-east Asian nations.

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“New Delhi is hoping to finalize several of these within the 90-day US tariff window—expanding market access and boosting supply chain resilience," said one of two government officials mentioned above. Both are directly involved in the process.

“This is a golden opportunity for India. We are recalibrating our export strategy and exploring new markets to diversify our export destinations," this official added.

Queries sent to ministries of commerce and external affairs on Thursday seeking comments for the story remained unanswered.

India has already concluded the 10th round of FTA talks with the EU and launched discussions with the UK in March. “We are progressing positively with the US on a BTA as well, and given the receptiveness from the American side, we’re hopeful of sealing the pact earlier than the timeline of fall 2024," said the same official.

India dealt with the tariff issue with great understanding from the very beginning, commerce and industry minister Piyush Goyal told reporters, news agency ANI reported from Mumbai on Thursday.

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“Prime Minister Narendra Modi and President Donald Trump had in February decided to enter into a BTA which will simplify bilateral trade, step up bilateral trade by two-and-a-half times to $500 billion, create more jobs for our citizens and strengthen the economy. I believe India was anyway ahead in this race and talks are progressing well," Goyal said.

However, trade experts warned against rushing into a comprehensive BTA with the US, given Trump’s aggressive and transactional approach. “Such a deal could pressure India to open sensitive sectors like agriculture, e-commerce, pharma patents, and intellectual property," said Ajay Srivastava, co-founder of the Global Trade Research Initiative.

Instead, Srivastava recommended a limited “zero-for-zero" tariff for all goods, except cars and agricultural commodities. “This would align better with India’s long-term interests and mirror what Europe has offered the US," he said.

The US is India’s largest export market. In FY24, India exported goods worth $77 billion to the US, which accounted for about 18% of Indian exports that year. India imported goods worth $42.2 billion from the US that year, 6.2% of Indian imports that year.

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The massive tariff imposed by the US against China has also left India figuring out ways to tighten its guard against any indirect Chinese imports, including those that may be dumped. Officials confirmed that goods routed through Asean countries and other FTA partners are being carefully scrutinized for any attempt to conceal their origin.

“India remains cautious about becoming a backdoor for Chinese supply chains," said the second official. “While we’re deepening global partnerships, we are also stepping up enforcement to restrict disguised Chinese goods."

The shift in US trade policy comes amid spiralling tensions with China. Though initially framed as a broad tariff push, Trump’s decision to single out China for a 125% rate marks a pivot with echoes of their 2018-2023 trade war.

That earlier phase failed to dent China’s export might. While US imports from China fell by $81.56 billion during the period, China’s global exports surged by more than $1.1 trillion, reflecting its resilience.

Exports warned of a hit to India on two fronts

“The 90-day pause on reciprocal tariffs offers short-term relief, but the continuation of a flat 10% duty increases the cost of Indian exports to the US and erodes our tariff advantage over competitors like Vietnam and Bangladesh," said Bipin Sapra, tax partner, EY India.

"With the US-China trade war escalating and the imposition of substantially high tariff on Chinese goods, there’s a window of opportunity for India to attract global supply chains and position itself as a preferred destination. However, we must remain cautious about the risk of China redirecting exports to India and other emerging markets, which may necessitate anti-dumping measures. This is the right time to accelerate a bilateral trade agreement with the US and for Indian corporates to revisit their pricing, supply chain, and export strategies to navigate an increasingly complex global trade environment," he added.

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Pawan Gupta, chief executive and co-founder of Fashinza, a B2B fashion supply chain startup, said, "The 90-day pause from tariffs is a strategic move. With global buyers actively diversifying away from China, this window gives Indian manufacturers a real chance to step up and capture that shifting demand. It’s a great opportunity for India to showcase its manufacturing reliability, especially in textiles, and reinforce its position as a preferred sourcing destination.

“However, to truly capitalize on this moment, Indian manufacturers must aggressively step up their capex and invest in large-scale, mass manufacturing setups. If leveraged well, this period could pave the way for long-term supply chain partnerships, greater export traction, and a stronger foothold in global trade."