India, US Seek Tariff Deal in 2 Days; Dairy a Sticking Point.

India US Tariff Deal- India Eyes US Tariff Deal Soon, Dairy Issue Still Unresolved

NEW DELHI, INDIA: India is in a hurry to conclude a mini-deal on tariffs with the United States before a July 9 deadline, the government sources said they held out hope that they could finalize an agreement within two days. The dairy sector remains however a key bone of contention that risks scrapping the early harvest package that was meant to avert a reintroduction of higher US tariffs of Indian products.

The Imminent Deadline-

This is urgent because the US has issued a 90-day ban on reciprocal tariffs that are set to be implemented in April of the year 2025. This deferral, which expires on July 9, suspended a further 26 per cent obligation on Indian goods. Failure of reaching any agreement might mean the Indian exporters have to pay a total of 36% tariff (10% baseline tariff+ 26 % reciprocal) tariff which will affect several Indian industries. President Donald Trump has on many occasions expressed the possibility that the deadline might not be extended, which places huge pressure on the negotiators.

Dairy: The Red Line of India-

The core of the standoff is the need by the US of having increased access to the India agricultural and dairy markets. Though the US wants to gain duty concessions on products containing items such as apples, tree nuts, genetically modified crops and above all, dairy products, India has taken a strict stand on dairy.

The government authorities point out that the liberalization of the dairy industry is also a politically and economically sensitive subject to India. It has more than 80 million small scale farmers, and any agreement would be seen as a direct challenge to their lives, and food security in the nation. India too has its import procedures, one of which implies that dairy products have to be obtained out of the animals that are not allowed feed on meat, blood, or internal organs of others of the kind of animals, which de facto prevents the majority of the US dairy products.

What India Wants?

On the other hand, India is looking for a complete reduction of US tariffs on its labor-led exports, such as textiles, engineering goods, leather goods, gems and jewelry, that are currently subject to tariffs between 8% and 20%, thereby placing Indian exporters at a disadvantage. If India can achieve tariff reductions in merchandise sectors with unfilled quotas, it could help develop Indian industries and employment, as these sectors are the most significant sources of jobs within full impact programs such as the GBS programs.

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Is a “Mini-Deal” Coming?

Given the large gaps, it will be a surprise if either side is able to negotiate a reduction in tariffs, but both sides appear to agree on a possible “mini-deal” or “early harvest agreement”, even if the reduction items are less sensitive, and certainly less risky. This “mini-deal” would set the table for a potential Bilateral Trade Agreement (BTA), for which both countries to date hope to finalize in the September-October timeframe this year, with a long-term goal to double bilateral trade to USD 500 billion by 2030.

In order to address these gaps, the lead Indian negotiators have extended their stay in Washington. It is anticipated that this will provide a window for both sides for positive progress. While everything appears to be positive at this moment, the fundamental disagreement over dairy continues to exemplify the balance between gaining trade benefits and maintaining domestic goods, especially those that are important to civil society interests and rural economies. So, the next 48 hours will be telling as to whether the parties can earn a breakthrough before the expiration of the agreement.

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