Racing against the clock: Why US, India can't miss window for a trade deal

Time is running out for Washington and New Delhi. On July 9, a 90-day pause on new American tariffs will expire, ending a brief truce meant to enable a limited trade deal. In April, President Donald Trump announced two steep tariffs: A 10 per cent universal tariff on all imports and a 16 per cent reciprocal tariff targeting Indian goods. While the United States temporarily suspended the latter to allow negotiations, that window is quickly closing.

 

The negotiation is unfolding in real time. The US is using tariffs as leverage; India, for its part, is signalling unusual flexibility. More than just market access is on the table — what’s at stake is the future of economic cooperation between the world’s largest and fifth-largest economies. A US delegation, led by  Assistant United States Trade Representative Brendan Lynch, is currently in New Delhi for the next round of discussions —part of its effort to strike a deal before the 90-day pause expires. As Secretary of Commerce, Howard Lutnick noted during US-India Strategic Partnership Forum’s (USISPF) Annual Leadership Summit in Washington, “You should expect a deal between the United States and India in the not-too-distant future because I think we found a place that really works for both countries.”

 

What makes these negotiations extraordinary is how far India has been willing to go to meet US concerns. New Delhi has put a bold offer on the table: Slashing tariffs to near zero on a wide array of non-agricultural goods imported from the US. These cuts are offered preferentially to the US alone, not to all World Trade Organization (WTO) partners. Such sweeping tariff cuts—from a country traditionally known for high trade barriers — are rare outside full free trade agreements.

 

Why make such a generous offer? Because the alternative is stark. Without an interim deal, Indian exports could face 26 per cent tariffs. Given that the US is India’s largest export market, millions of Indian jobs hang in the balance. A tariff spike would force manufacturers to absorb the cost or raise prices, hurting competitiveness and demand—a painful prospect for India’s economy.

 

India’s ask is straightforward: Shield its exports from these new tariffs. Specifically, India seeks a guarantee that the US will not impose the 16 per cent reciprocal tariff, and ideally, an exemption from the 10 per cent universal tariff. It’s a simple notion of reciprocity: India is offering near-duty-free access and expects similar treatment in return.

 

The UK-US tariff deal’s cautionary tale

 

As Washington and New Delhi work towards a deal, the recent US-UK agreement offers both a blueprint and a caution. Weeks ago, the UK struck a mini deal with the Trump administration under similar pressure. London moved quickly and secured partial relief: The White House offered tariff-rate quotas on metals and autos and outlined a path to phase out steel and aluminium tariffs through a new “trading union.”

 

However, Britain did not get an exemption from the 10 per cent universal tariff. From Washington’s view, the UK deal fit within the President’s “America First” strategy: Friendly, but firm.

 

India’s case differs in two ways. First, New Delhi is offering far more upfront — near-zero tariffs across a broad range of goods and commitments on non-tariff barriers. Second, Prime Minister Narendra Modi cannot afford a one-sided deal. Opening India’s market while still facing US tariffs would invite backlash at home.

 

What happens next will shape not only bilateral trade but the tone of US-India economic diplomacy for years. Three scenarios are possible:

 

Scenario 1

 

Exemption from the 16 per cent reciprocal tariff only. In this outcome, the US drops the 16 per cent tariff but retains the 10 per cent universal tariff. For India, this isn’t a collapse — particularly if other Asian exporters, such as Vietnam, fail to secure similar exemptions. Still, Indian goods would become 10 per cent more expensive, hurting price-sensitive sectors. For Washington, India’s sweeping tariff cuts would open access to a $3.7 trillion economy. But the optics for New Delhi are tricky: Liberalising access for US goods while still facing new barriers is a tough sell. “Half a loaf” avoids a trade war but comes at a domestic political cost.

 

Scenario 2

 

Exemption from both 16 per cent and 10 per cent tariffs. This is the ideal outcome for India and a goodwill gesture from Washington. The US exempts India from both tariffs, effectively carving it out of a policy not waived even for the UK. Indian goods retain near-zero duties in the US, and US goods gain significant access to India’s market—a clear win for both.

 

Crucially, this would show strategic trust: That Washington can adjust its global tariff policy for a key partner and that India is willing to liberalise in return. If the political will exists, this interim deal could lay the groundwork for a broader bilateral trade agreement (BTA). This scenario is ambitious — carving out one country from a “universal” tariff is a big ask — but India’s strategic value and bold concessions merit serious consideration.

 

Scenario 3

 

India matches the 10 per cent tariff — a shift towards reciprocity here. The US exempts India from the 16 per cent tariff but retains the 10 per cent universal duty. Indian exports become 10 per cent more expensive, straining already thin margins. India may walk back its zero-tariff offer and impose reciprocal 10 per cent duties on US goods. Politically, this is more palatable: India avoids appearing overly conciliatory while keeping talks alive. US exporters, however, lose a rare opening in India.

 

If this is the outcome, India should prioritise resolution of the 10 per cent tariff in the next negotiation phase, aiming to address it by fall 2025 when the first tranche of the broader BTA is expected.

 

Section 232 investigations: The other wild card

 

Beyond these talks, India must prepare for the outcomes of seven pending Section 232 investigations—including in pharmaceuticals, one of its top export sectors. The UK, in its recent deal, secured relief on some 232 tariffs through negotiated quotas and carve-outs. India should pursue similar engagement once decisions are announced.

 

Any interim agreement should include a mechanism for India to resolve 232 measures case-by-case, particularly where supply chain interdependence is critical.

 

The road ahead

 

Prime Minister Modi’s choice to prioritise dialogue over retaliation when President Trump’s tariffs were first announced created space for diplomacy. Rewarding that choice now would validate India’s faith in negotiation and lay a stronger foundation for a future agreement.

 

By fall, both governments aim to conclude the first tranche of the BTA, bringing tougher issues — from digital trade to agriculture — into focus. If India doesn’t secure tariff relief now, it should press for it then. To meet the shared $500 billion trade goal by 2030, both sides must commit to dismantling structural barriers like the 10 per cent universal tariff.

 

The clock is ticking. India has made bold offers. The US has paused penalties. It’s time to turn that momentum into a deal that is fair, forward-looking, and strategically sound. With just weeks left, “yes” isn’t just possible — it’s essential. 

        

The authors are, respectively, former assistant US trade representative and senior adviser – trade, and  manager – trade policy and emerging & critical technologies at USISPF