India and US move forward with bilateral trade agreement, but no talks on reciprocal tariffs

According to three senior government officials, India is not engaging with the US on reciprocal tariffs; instead, discussions remain centered on shaping a proposed Bilateral Trade Agreement (BTA). The officials spoke after a high-level Indian delegation visited the US from 4-8 March to discuss the contours of the proposed BTA.

"We are adhering to the commitments outlined in the joint statement issued on 13 February for the proposed BTA, which is targeted for completion by the fall of 2025," said the first among the three officials mentioned above on the sidelines of the release of trade data on Monday.

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India's focus on the bilateral trade agreement comes amid a lack of clarity on which countries the US plans to impose reciprocal tariffs.

There is a legal process for levying reciprocal tariff. The US is conducting an investigation and based on its report, will consider imposing a reciprocal tariff on specific items.

Besides India, the US is also engaging with the UK for a trade agreement.

“Our visit was focused on the Bilateral Trade Agreement—how it will take shape, and what its key elements will be—all of which are under discussion. But one thing we are certain about is that we are moving forward in a positive direction on the BTA, and we are very open to doing a very good trade deal with the US. In fact, both countries are moving forward with the agreement in a positive manner," said the second official, who wished not to be named.

On opening agriculture market

In response to US Commerce Secretary Howard Lutnick’s statement regarding India's need to open up its agricultural market, the third Indian government official said, "That is their demand, and both countries have their own demands, which is why we are taking time to frame a comprehensive trade agreement."

"The U.S. has chosen the bilateral path, and we are making positive progress on it," the official said.

Ajay Sahai, DG, FIEO, said, "I totally agree with it, as India is already committed to finalizing the BTA by the fall of 2025, and that is the commitment both the Prime Minister and the President have made. At the same time, we are looking to increase trade from $200 billion to $500 billion. Our focus has to be on the BTA, and since India is constructively engaged with the U.S., the reciprocal tariff on 2 April may be deferred for India. I personally feel that the reciprocal tariff will not be imposed on India."

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As per the joint statement of 13 February, which was issued after Prime Minister Narendra Modi met US President Donald Trump, the US and India plan to negotiate the first phase of a multi-sector BTA by the fall of 2025. 

Senior representatives will lead discussions to align trade ties with the COMPACT’s (Catalyzing Opportunities for Military Partnership, Accelerated Commerce & Technology) goals. Both nations aim to boost market access, reduce trade barriers, and enhance supply chain integration through an integrated approach, as per the joint statement.

"The big shift in US trade policy threatens to negatively impact global trade. The move has already resulted in many countries taking a protectionist approach towards trade. All indications suggest that the US could further harden its stand on tariffs which will affect the world adversely. India has been one of the few major countries which has managed to do well on exports despite various back-to-back challenges," said Pankaj Chadha, Chairman, EEPC India.

Welcoming initial steps

As per the joint statement, both leaders welcomed initial steps to address bilateral trade barriers. The US acknowledged India’s recent tariff reductions on bourbon, motorcycles, ICT products, and metals, and its improved market access for US agricultural products and medical devices, while India appreciated US efforts to boost exports of Indian mangoes and pomegranates. 

Both sides pledged to enhance trade by increasing US industrial goods exports to India and Indian labour-intensive manufactured exports to the US while also collaborating to expand agricultural trade.

According to data from the Commerce Ministry, India's exports to the US stood at $60 billion in the current fiscal year (April-December), while imports were recorded at $34.3 billion, resulting in a trade surplus of $25.7 billion. In FY24, India's exports to the US were $77.5 billion, with imports at $42.2 billion, leading to a trade surplus of $35.3 billion. In FY23, India’s exports were $78.5 billion, with imports at $50.9 billion, leading to a trade surplus of $27.7 billion.

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Earlier, Mint reported that India is considering fixing a quota for the import of lentils and plans to increase the share of West Texas Intermediate (WTI) crude in the country’s import basket.

WTI is the U.S. benchmark for crude oil, while Brent crude is the benchmark for oil sourced from the North Sea area in Europe, largely produced by the UK and Norway.

According to an SBI Research report, India's exports to the United States could decline by 3-3.5% if Washington implements reciprocal tariffs. However, this potential impact is expected to be mitigated by India's diversified export portfolio and strategic trade initiatives. The report highlights India's efforts to expand its export base, enhance value addition, and explore alternative trade routes, including new pathways from Europe to the US via West Asia, effectively redrawing supply chain dynamics.