India and the United States have agreed to lower tariffs on select goods as part of an upcoming trade agreement aimed at fostering mutual economic benefits, according to a senior Indian government official.
On February 13, both nations set an ambitious target under the “Mission 500” initiative, striving to more than double bilateral trade to $500 billion by 2030. To achieve this, they have decided to initiate discussions on a Bilateral Trade Agreement (BTA), with the first phase expected to be finalized by the fall of 2025.
As part of this collaboration, the two countries will work towards boosting trade in industrial goods, labor-intensive manufactured products, and agricultural commodities.
Beyond a Mini Trade Deal
When asked whether this agreement could be classified as a “mini trade deal,” the official stated that the negotiations will determine its scope. Unlike the earlier talks under former US President Donald Trump’s administration—where discussions centered around a limited trade pact under the Most Favored Nation (MFN) principle—this agreement is being structured as a comprehensive bilateral trade deal, ensuring greater fairness and balance.
Trade Talks and US Tariff Strategy
The recent discussions took place during a meeting between Indian Prime Minister Narendra Modi and former US President Donald Trump on February 13. Earlier efforts to negotiate a smaller trade agreement during Trump’s first term were later shelved by the Joe Biden administration.
A key aspect of US trade policy, Trump’s ‘Fair and Reciprocal Plan’, was unveiled just before the meeting. The plan suggests the introduction of new tariffs on a country-by-country basis to address trade imbalances. However, it remains unclear whether these tariffs will be applied sector-wise or product-wise.
Impact on India
The United States has yet to announce specific reciprocal tariffs targeting any particular nation. The Indian government official emphasized that India will respond appropriately when any such measures are introduced.
While retaliatory tariffs from the US are expected to impact several economies with significant trade deficits, India’s trade deficit with the US remains relatively small at approximately $40 billion—far lower than the $300 billion deficit with China or the $200 billion deficit with Mexico, as per World Bank data.
Despite Trump’s past criticisms of India’s high tariffs and complex business environment, the official clarified that the ongoing Bilateral Trade Agreement is independent of any US tariff actions. The focus remains on enhancing trade cooperation and achieving the ambitious $500 billion trade goal.
