India-US interim trade deal prospects dim ahead of tariff deadline, sources say

NEW DELHI: The prospects of an interim trade deal between India and the United States before Washington's August 1 deadline have dimmed, as talks remain deadlocked over tariff cuts on key agricultural and dairy products, two Indian government sources said.

AI Brief

US threatens 26% tariffs on Indian goods if no trade deal is reached by August 1.
Talks stall over agriculture access and tariff relief on steel, autos.
Both sides aim for a broader trade deal by September or October.

U.S. President Donald Trump threatened a 26% tariff on Indian imports in April but paused implementation to allow for talks. That pause ends on August 1, though India has yet to receive a formal tariff letter, unlike over 20 other countries.

India's trade delegation, led by chief negotiator Rajesh Agrawal, returned from Washington after a fifth round of talks without a breakthrough.

"An interim deal before August 1 looks difficult, though virtual discussions are ongoing," one of the Indian government sources said, adding a U.S. delegation was expected to visit New Delhi soon to continue negotiations.

Talks are stalled as New Delhi is refusing to open its politically-sensitive agriculture and dairy sectors, while Washington is resisting India's demand for relief from higher tariffs on steel, aluminium and autos.

Officials are exploring if these issues can be deferred to a later stage, after an interim deal, the second Indian official said.

Ajay Sahai, director general of the Federation of Indian Export Organisations, warned sectors like gems and jewellery could be hit hard if 26% tariffs are imposed.

"However, this could be temporary, as both countries aim to sign the deal over time," he said.

U.S. Treasury Secretary Scott Bessent told CNBC on Monday that the Trump administration was more concerned with the quality of trade agreements than their timing.

Asked if the deadline could be extended for countries in talks, he said it was up to Trump.

Indian officials remain hopeful of clinching a broader deal by September or October, in line with what was agreed by Prime Minister Narendra Modi and Trump in February.

"Given that there have been five rounds of negotiations and another U.S. delegation is expected, we remain optimistic about finalising a trade pact," a third government source said.

The sources requested anonymity as negotiations are not public.

The Indian commerce ministry and the U.S. Trade Representative's Office did not immediately respond to emailed requests for comments.