During Indian Prime Minister Narendra Modi’s visit to Washington last week, the United States and India announced plans to begin work on a trade deal to reduce tariffs and other barriers for goods and services and expand two-way agricultural trade.
A joint leaders’ statement described the goal as a “multi-sector bilateral trade agreement” – or a BTA. Although not a free trade agreement, which covers “substantially all trade” between two parties, a U.S.-India deal, the statement said, would include tariff reduction and removal of nontariff barriers. The leaders are eyeing a deal on the first tranche of negotiations by this fall.
The announcement came the day President Donald Trump directed administration officials to study reciprocal tariffs that would hike U.S. duties on countries with higher tariffs than the U.S. India could be hit particularly hard under such a plan; the nation maintains tariffs on agricultural imports substantially higher than the U.S., applying an average tariff rate of 39% compared to the U.S.’ 4%, according to the World Trade Organization.
Trump even singled India out in a press conference announcing the reciprocal tariff investigation, suggesting it is “at the top of the pack” of U.S. trading partners that would face higher duties.
In response, India lowered tariffs on U.S. bourbon on Monday from 150% to 100%. But securing widespread and significant tariff reductions from the Indian government for agricultural goods has been a long-standing challenge for successive U.S. administrations.
Under President Joe Biden, Modi’s government agreed to drop new tariffs imposed during Trump’s first term, reduce duties for berries and other specific U.S. agricultural exports and resolve multiple lengthy WTO disputes with the U.S.
In Trump’s first administration, the U.S. ended India’s access to a trade preference program and tried to negotiate concessions, particularly in the agricultural sector, in exchange for its restoration. But negotiators found the Indian government immovable.
“After several sessions, it was obvious that these talks would not succeed,” former U.S. Trade Representative Robert Lighthizer wrote in his 2023 book “No Trade is Free,” adding, “India was not in the habit of opening its market.”
There are reasons to believe this time may be different, said Richard Rossow, chair of the India and emerging Asia economics program at the Center for Strategic and International Studies.
“India has changed quite a bit since the last time that Trump was in office. India looks at trade with a little bit more nuance,” Rossow told Agri-Pulse. Modi’s government, for example, has signed a slate of trade deals since Trump’s first term, including with Australia and the United Arab Emirates, and is working on free trade agreements with the UK, the European Union and Israel.
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“They realize being part of supply chains doesn't mean always making the final thing, it means you’ve got to import stuff as well as export,” Rossow said.
The threat of reciprocal tariffs could spur concessions from the Indian government, analysts said. The U.S. is India’s largest and most important export market, and officials will be reluctant to jeopardize their foothold in U.S. jewelry, electronics, medical appliance and rice markets.
This newfound willingness to negotiate, analysts told Agri-Pulse, should benefit U.S. agriculture, which is almost certain to feature prominently in any deal.
“Both sides want more market access on agriculture,” said Mark Linscott, who served as assistant USTR for south and central Asian affairs during Trump’s first term and led negotiations with the Modi government. “That is definitely going to be, I think, a high-priority sector.”
U.S. agricultural exports to India topped $1.7 billion in 2023, according to Agriculture Department data, with tree nuts, cotton and ethanol making up the bulk of shipments. Meanwhile, India exported close to $6 billion of agricultural products to the U.S. the year before.
In the joint statement last week, both leaders specifically mentioned an interest in boosting trade in agricultural goods.
Agriculture is a politically sensitive industry for India. Farmers make up a large voting bloc and have staged several disruptive demonstrations in recent years. Thousands of farmers protested in New Delhi last year to press for additional minimum crop prices and free electricity, arguing that leaving them at the mercy of the market would devastate rural communities. Officials will be keenly aware of the potential backlash from dismantling too many protective trade barriers.
Virginia Houston, director of government affairs at the American Soybean Association, told Agri-Pulse that soybean exports to India face tariffs upwards of 50%. The country also bans imports of genetically modified crops, keeping soybean imports to less than $30 million per year.
The challenge of securing greater market access in India for U.S. agriculture “should not be underestimated,” Brian Kuehl, executive director of Farmers for Free Trade, told Agri-Pulse.
Staple grain products, for example, are unlikely to be part of an agreement because of their political importance in India. The Indian government offers farmers guaranteed prices for wheat, barley and rice, among other commodities.
“Those are the sectors where I think India is going to hold the line as hard as they can,” Rossow said. But he added there are ample market access opportunities for products that India doesn’t grow domestically, like certain fresh fruits and produce.
Linscott said negotiators made headway during Trump’s first term on discussions around mangoes, pomegranates and cherries. “Some of that's already potentially teed up,” he added.
Mark Linscott Linscott, now a nonresident senior fellow at the Atlantic Council, suggested that U.S. negotiators could secure concessions for feed grains. The country’s growing middle class is driving new demand for poultry and dairy products, and growing flocks and dairy herds are increasing the need for animal feed.
India’s GM restrictions might pose challenges for securing access for U.S. crops like soy and corn, Linscott said. Removing that trade barrier will likely be a priority for U.S. negotiators. But negotiating a more favorable trade environment for U.S. distillers dried grains and sorghum could be an easier lift, he added.
Boosting U.S. ethanol exports to the country could also be a win-win, Kuehl said. The U.S. has already captured more than 80% of India’s import market, according to USDA. Imported ethanol, however, is currently not allowed in on-road fuel blending and can only serve the medical and industrial markets.
Kuehl pointed out that India wants to improve its air quality, and increasing U.S. ethanol imports and fuel blending rates could help it reach environmental goals.
“There's no reason India shouldn't be buying U.S. ethanol all day,” Kuehl said. India has set a blending target of 20% by the end of 2025; it currently has a blending rate of 18%.
Dairy market access may be a difficult issue. Indian dairy consumption is growing, but the Modi government sets strict import limits on the types of dairy products and volumes. Accordingly, most U.S. dairy sales to India consist of milk albumin and lactose destined for nonfood uses like pharmaceuticals and dietary supplements, while domestic sources monopolize food markets.
Whether the U.S. can increase dairy exports, Rossow said, could depend on how far it is willing to use reciprocal tariffs as negotiating leverage.
“When you talk about sensitive areas like dairy, it really depends on whether the Trump administration looks at this as make or break,” Rossow said. A reciprocal tariff that threatens to erode Indian exporters' market share in key industries could spur some compromise in politically sensitive industries, Rossow added.
“India will bend to some extent. But if India can put enough other things on the table that the Trump administration is appeased, maybe India survives without digging in deep in some of the more painful areas,” he said.
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