The United States is currently negotiating a limited trade agreement with India during a 90-day pause on recently imposed tariffs, with the goal of securing lower tariffs on key American exports such as medical equipment. India, in turn, is seeking complete exemption from the 26% reciprocal tariff imposed by the US this includes a 10% base tariff already in effect.
Sources familiar with the matter say that while the US administration would need Congressional approval to reduce tariffs below the standard Most-Favoured Nation (MFN) rates, it does have the authority to waive the additional reciprocal tariffs, which go beyond MFN levels. Therefore, India is pushing for an exemption from the full 26%, as this falls within the Trump administration’s current powers.
India is not prepared to offer major new concessions at this stage but will seek broader access to US markets for its labour-intensive industries during extended negotiations for a full bilateral trade agreement (BTA), targeted for finalization by September-October 2025.
“We will also ask the US to clarify how it plans to obtain Trade Promotion Authority from Congress, which would allow them to reduce tariffs below MFN levels,” said a source close to the talks.
Washington, meanwhile, is pressing India for tariff relief and other market access in sectors such as automobiles, motorcycles, alcoholic beverages, agricultural products, and medical equipment. The US is also pushing for provisions on digital trade and data localization rules to be included in the early trade agreement.
Indian Commerce Minister Piyush Goyal recently held productive discussions in Washington with US Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer. Negotiating teams from both countries are currently in talks, with hopes of finalizing a preliminary agreement before the July 8 deadline when the 90-day tariff pause expires.
The US had imposed reciprocal tariffs on countries running trade surpluses with it, including India, as of April 2. Although a temporary suspension was announced, a 10% baseline tariff remains. Industry observers note that if India successfully secures an exemption, it would gain a competitive edge over other countries such as Vietnam, Bangladesh, and Indonesia, which are also seeking trade deals with the US under the pressure of even steeper reciprocal tariffs.
