Factbox: India-US Trade Talks Derailed by Farm Market Dispute

By Manoj Kumar

NEW DELHI () - President Donald Trump stated on Wednesday that the United States would implement a 25% tax on Indian products beginning August 1, referencing New Delhi's elevated tariffs and stringent non-monetary trade obstacles.

Here are the main challenges that seem to have disrupted the negotiations between the U.S., the world's biggest economy, and India, its fifth-largest:

CONTENTIOUS ISSUES

India has refused U.S. pressure to liberalize its agricultural and dairy sectors, arguing that these actions could negatively impact countless impoverished farmers. Historically, New Delhi has kept agriculture out of free trade agreements to safeguard local jobs and ways of life.

Tariff reductions on corn, soybeans, wheat, and ethanol are still not being considered, as Indian authorities mention dangers posed by subsidized American agricultural goods. Local car manufacturers, pharmaceutical companies, and small businesses have also pushed for a slow approach, worried about disturbances caused by U.S. imports.

HIGH TARIFFS

As per a White House factsheet, India applies an average Most Favored Nation (MFN) tax rate of 39% on agricultural products brought in from abroad, whereas this figure stands at 5% in the United States, with certain taxes reaching up to 50%.

The Trump administration has consistently highlighted these tariffs as a major barrier to stronger commercial relations with India.

U.S. DEMANDS

The U.S. is advocating for improved market access for agricultural products, ethanol, dairy, alcohol, automobiles, pharmaceuticals, and medical equipment in India. Additionally, it seeks for India to lower non-tariff obstacles and update regulations related to intellectual property rights, e-commerce, and data movement.

LACK OF RECIPROCITY

Although providing minimal reductions in tariffs and increasing imports of American energy and defense products, India states it is still waiting for specific suggestions from Washington. Officials mention President Trump's erratic trade actions as an issue.

Indian exporters continue to express concern about increasing U.S. import taxes: a 10% standard duty, as much as 50% on steel and aluminum, 25% on vehicles, and recently 25% applied more widely across various products.

TENSIONS OVER PAKISTAN

Donald Trump's frequent claims about facilitating a truce between India and Pakistan this past year have caused worry in Delhi. Officials from India see these statements as favoring Pakistan, which could affect overall diplomatic ties between the two nations.

OVERCONFIDENCE IN A DEAL

Indian authorities at first felt assured about reaching an agreement, anticipating that the U.S. would prioritize enhanced commerce with one of its largest business allies. Modi and Trump intended to finalize a preliminary accord by fall 2025, aiming for two-way trade worth $500 billion by 2030, compared to $191 billion in 2024.

Although facing a tariff challenge, India aims for its exports—such as medicines, electronic products, engineered items, and clothing—to stay competitive, particularly due to favorable tariffs compared to China.

India's export of products to the United States reached $87 billion in 2024, with items such as gemstones and jewelry ($8.5 billion), pharmaceuticals ($8 billion), and petrochemicals ($4 billion) at the top of the list. Exported services, primarily from the information technology and professional service sectors, totaled $33 billion.

The U.S. ranks as India's third-biggest source of investment, having contributed $68 billion in total foreign direct investment since 2002.

US EXPORTS TO INDIA

U.S. manufactured goods exported to India, worth almost $42 billion in 2024, encounter significant import duties, varying between 7% for items like timber and machines, up to 15-20% for shoes and transportation gear, and approaching 68% on agricultural products.

(Reported by Manoj Kumar; edited by Mark Heinrich)