US – India Trade Deal: What We Know So Far

US–India Trade Talks Press On Amid Shutdown and Tariff Storms; India Eyes November Landing Zone

Mumbai | October 8

A year of trade tensions, tariff escalations, and diplomatic volleys has given way to a cautious revival of talks. India and the US, once at loggerheads over punitive tariffs, are now attempting to recalibrate terms. The path is fraught with logistical hurdles, political risk, and high stakes for exporting sectors. Here’s everything public to date, as of 6 October 2025.

Key Developments So Far

1. Early Signals & Ambition (Early 2025)
   • India formally initiated trade talks with Washington under the mandate to expand economic engagement. Reuters reported New Delhi’s commitment to engage with the Trump administration to deepen bilateral ties.
   • The trade framework was designed with ambitious targets: a first-phase deal by October–November 2025, and goal of doubling bilateral trade to USD 500 billion by 2030.
   • By March, Goyal had said talks were “progressing well” while warning of looming reciprocal tariffs.
2.  August Shock: Tariff Escalation & Diplomatic Backlash
   • The US imposed a 25% reciprocal tariff on Indian exports, citing trade imbalance. Then it followed with an additional 25% surcharge tied to India’s continued import of Russian crude, pushing many Indian export lines into a 50% barrier zone.
   • In response, India publicly condemned the measures as unfair, and asserted that it would not yield on strategic energy policy or sovereignty. Goyal said, “India will not bow down.”
   • India simultaneously engaged domestic exporters (textiles, chemicals, engineering, pharma) to assess tariff exposure and explore mitigation strategies.
3. Monetary Policy & External Pressure: Powell’s Comments & US Price Impact
   • US Federal Reserve Chair Jerome Powell observed that recent tariffs were having a “clearly visible” impact on US prices — a signal that protectionist measures were filtering into domestic inflation.
   • Powell’s earlier remarks about possible rate cuts have also stirred global markets, with ripple effects on emerging markets including India. For example, a past hint of rate moderation spurred rupee strength and bond yield shifts.
   • These monetary policy dynamics amplify the trade tension: if US rates ease, capital could flow into India, potentially easing pressure from the tariff shock.
4. Shutdown Disruption & Scheduling Uncertainty
   • As of 1 October 2025, the US government entered a partial shutdown following congressional delays in passing funding.
   • Goyal acknowledged the disruption: “We are in constant dialogue … but we’ll have to see how, where, and when the discussions can take place.”
   • Despite the shutdown, India continued to project confidence. Goyal reiterated that the November 2025 deadline was still very much on the table, and that next rounds might happen physically, depending on how shutdown constraints evolve.
5. Public Messaging & India’s Red Lines
   • Throughout this period, Goyal repeatedly emphasized that India would safeguard interests of farmers, dairy, and cultural sensitivities in any deal. Any agreement must respect national priorities.
   • At the ET World Leaders Forum, he stressed that while US relations are consequential, national interest is primary.
   • Jaishankar, India’s External Affairs Minister, affirmed that India’s “red lines” would not be crossed in negotiations.
6. Parallel FTA Strategy: EU & Global Outreach
   • As US talks continued, India intensified Free Trade Agreement (FTA) negotiations with the European Union, targeting a fair and balanced deal by December 2025.
   • Goyal, speaking in Doha, said the teams in Brussels were working with mutual sensitivity to bridge gaps.
   • In parallel, India has opened conversations with Qatar, Oman, Peru, Chile to reduce trade dependency on a single bilateral.
   • Goyal was scheduled to visit Qatar on 6 October for a Joint Commission meeting — a move to broaden India’s Gulf footprint.
7. Market & Macro Ripples
   • The rupee showed signs of slight strength on expected capital inflows (e.g. large IPOs), but market analysts caution that the “residue” of India–US trade friction remains an overhang.
   • According to FXStreet, persistent trade tension has dented investor sentiment, and FIIs have been net sellers — including ₹1,29,870.96 crore sold between July and September.
   • The World Bank warned that elevated tariffs on Indian exports could slow South Asia’s growth in 2026, given the shock to labor-intensive sectors.

Why It All Matters for Investors

• A successful BTA could undo much of the 50% tariff shock, restore visibility to margins across export sectors, and re-ignite capital inflows.
• Conversely, delay or failure to deliver concessions could prolong uncertainty, keep currency volatility high, and dampen export sentiment.
• The interplay of US monetary policy — particularly rate cuts hinted by Powell — adds a layer of volatility. If US rates ease, capital may seek emerging markets, providing relief to India’s external accounts.
• The simultaneous push for an EU FTA gives India strategic hedging — progress there could buffer downside risks from US talks.
• Sectors to monitor: pharma, chemicals, textiles, engineering goods, auto & components, energy/oil & gas, IT/services.

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