The United States and India, two of the world’s largest economies, have been engaged in high-stakes negotiations to forge a Bilateral Trade Agreement (BTA) aimed at deepening economic ties and addressing longstanding trade imbalances. These discussions, intensified in early 2025, come against the backdrop of U.S. President Donald Trump’s reciprocal tariff policy, which has introduced new complexities to the bilateral relationship. This article explores the latest developments in the BTA talks, the specifics of the reciprocal tariffs imposed on India, and the major products likely to be impacted, drawing on recent reports and official statements.

Progress on the Bilateral Trade Agreement

The U.S.-India trade relationship, valued at $190.08 billion in goods and services in 2023, is a cornerstone of their strategic partnership. During Prime Minister Narendra Modi’s visit to Washington in February 2025, both nations committed to negotiating the first phase of a multi-sector BTA by autumn 2025, with an ambitious goal of scaling bilateral trade to $500 billion by 2030. Recent developments indicate significant progress toward this objective.

In March 2025, India’s Commerce and Industry Minister Piyush Goyal held productive discussions in Washington with U.S. Trade Representative Jamieson Greer and U.S. Commerce Secretary Howard Lutnick. These talks focused on expanding market access, reducing tariff and non-tariff barriers, and enhancing supply chain integration. By mid-April 2025, the two countries finalized the terms of reference for the first segment of the BTA, signaling a structured framework for negotiations. Indian officials have expressed optimism about concluding a “win-win” deal within a 90-day window, potentially by July 2025.

India has adopted a conciliatory approach, refraining from immediate retaliatory measures and prioritizing diplomacy. The Indian government is reportedly considering tariff reductions on $23 billion worth of U.S. imports, including high-end motorcycles, bourbon, and select agricultural products, to mitigate the impact of U.S. tariffs and strengthen trade ties. Additionally, both nations are exploring strategic concessions, such as defense purchases and energy imports, to balance the trade deficit, which stood at $46 billion in favor of India in 2024.

The BTA negotiations are also aligned with the Catalyzing Opportunities for Military Partnership, Accelerated Commerce & Technology (COMPACT) initiative, which aims to foster collaboration in defense, technology, and trade. However, challenges remain, particularly regarding India’s high tariffs on agricultural products and U.S. demands for greater market access in sensitive sectors like electronics and agriculture.

U.S. Reciprocal Tariffs on India: Key Updates

On April 2, 2025, President Trump announced reciprocal tariffs under the “Make America Wealthy Again” trade policy, targeting countries with significant trade deficits with the U.S. India faces a 27% tariff on its exports to the U.S., calculated as half of the 52% average tariff India imposes on American goods. This tariff comprises a 10% baseline rate effective from April 5, 2025, with an additional 17% levy implemented on April 9, 2025.

In a significant development, the U.S. paused the reciprocal tariffs for 90 days starting April 9, 2025, providing a window for India and other nations to negotiate trade deals. This pause, set to expire on July 9, 2025, has been described as a relief for Indian exporters, particularly in sectors like shrimp, which faced competitive disadvantages compared to countries like Ecuador. The Commerce Ministry has not confirmed whether the tariffs will resume post-pause, emphasizing ongoing BTA negotiations.

The tariffs are part of a broader U.S. strategy to address a $1.2 trillion goods trade deficit, with India’s $46 billion surplus drawing particular attention. The White House has justified the tariffs as a response to “non-reciprocal trade practices,” citing India’s high tariffs and non-tariff barriers, such as import licensing and digital restrictions. The tariffs will remain in effect until the U.S. determines that the trade deficit and underlying imbalances are resolved.

Major Products Impacted by the Tariffs

The 27% reciprocal tariff applies to most Indian exports to the U.S., with exemptions for pharmaceuticals, semiconductors, copper, gold, lumber articles, select critical minerals, and energy products.

The following sectors, which constitute a significant portion of India’s $83.77 billion merchandise exports to the U.S. in 2023, are expected to face the brunt of the tariffs:

Electronics ($14 billion): Telecom instruments and consumer electronics, which account for 15.6% of India’s exports to the U.S., will see tariffs rise from near-zero to 27%. This could increase costs for U.S. consumers and challenge Indian manufacturers’ competitiveness.

Gems and Jewelry ($9 billion): Precious and semi-precious stones, as well as gold and other jewelry, face a $2.12 billion hit. The Gem & Jewellery Export Promotion Council is engaging with U.S. stakeholders to mitigate the impact.

Textiles and Apparel ($2.8 billion): Ready-made cotton garments and accessories are vulnerable, though India’s relatively lower tariff rate compared to competitors like Vietnam (46%) and Bangladesh (37%) may offer a competitive edge.

Steel and Auto Parts ($2.7 billion): Products of iron and steel, along with auto parts, face additional pressure from the 27% tariff, compounded by a separate 25% tariff on automobiles and auto parts effective April 2 and May 3, 2025, respectively.

Petroleum Products ($4.1 billion): Refined petroleum exports, while not exempt, may see limited impact due to India’s growing role as a reliable supplier amid global supply chain shifts.

The Global Trade Research Initiative (GTRI) estimates that India’s exports could decline by $5.76 billion annually if the full 27% tariff is enforced, though India’s diversified export portfolio and strategic initiatives may mitigate losses by 3-3.5%.

Economic and Strategic Implications

The reciprocal tariffs have rattled Indian financial markets, with the Sensex and Nifty declining over 3% on April 7, 2025, reflecting investor concerns about export-driven sectors. However, India’s relatively lower tariff rate compared to China (125%) and Vietnam (46%) positions it favorably in the U.S. market. Analysts suggest that India’s consumer-led economy, with exports accounting for only 20% of GDP, provides leverage in negotiations compared to export-heavy economies like Vietnam.

To counter the tariffs, Indian exporters are exploring alternative markets in the EU, Southeast Asia, and Africa, while leveraging existing Free Trade Agreements (FTAs). The government is also recalibrating supply chains and encouraging joint ventures with U.S. firms to bypass tariffs. Long-term, the tariffs could spur domestic manufacturing in India, aligning with the “Make in India” initiative, though short-term challenges remain for tariff-sensitive sectors.

Conclusion

The U.S.-India BTA negotiations represent a critical opportunity to reshape bilateral trade amid the complexities of reciprocal tariffs. With the terms of reference finalized and a 90-day tariff pause in place, both nations are poised to accelerate talks toward a mutually beneficial agreement. While sectors like electronics, gems, textiles, and steel face significant challenges, India’s strategic concessions and diversified export strategy could soften the blow. As negotiations progress, the ability of both countries to balance economic interests with geopolitical priorities will determine the success of this pivotal trade partnership. The coming months will be decisive in defining the future of U.S.-India economic cooperation.