Explained | Finer points of proposed India-US trade agreements as talks gain pace

New Delhi: Talks for the proposed bilateral trade agreement are gaining momentum, with the first in-person three-day negotiations between the chief negotiators of the two countries scheduled to begin on April 23 in Washington.

The visit is significant as India is exploring the possibility of an early tranche during the 90-day tariff pause window. The two sides have also finalised the terms of references (ToRs) for the agreement.

A list of Q&As (questions and answers) to explain the importance of this visit and implications of high tariffs on China for India:

Q. What is an 'early tranche'?

A. The US and India have aimed for a bilateral trade agreement (BTA), which is a kind of free trade pact. The two have decided to conclude the proposed BTA in two tranches or phases. They have fixed a deadline to conclude the first phase by fall (September-October) of this year.

However, taking advantage of the 90-day tariff pause window, India is exploring the opportunity to discuss an "early tranche".

Under this, both sides can look at discussing issues like greater market access for a limited number of goods (unlike maximum number of goods covered in a full FTA) and cutting down non-tariff barriers. This could set the stage for more complex negotiations (such as issues like government procurement and digital trade) in subsequent phases. However, the early tranche is possible only if it results in a win-win outcome for both.

Q. Has India negotiated free trade agreements in phases earlier?

A. Yes. India has made this kind of a pact with Australia. The India-Australia Economic Cooperation and Trade Agreement (ECTA) entered into force on December 29, 2022. Now they are negotiating a comprehensive trade pact by widening the scope of ECTA.

Q. What is the 90-day tariff pause window announced by the US?

A. US President Donald Trump announced sweeping reciprocal tariffs (or import duties) on a number of countries, including India and China, on April 2. However, on April 9, he announced a 90-day suspension of these tariffs until July 9 this year, except for those on China and Hong Kong, as about 75 countries approached America for trade deals. China is facing up to 245 per cent duty on its goods entering into America.

However, the 10 per cent baseline tariff imposed on the countries on April 2 remains in effect, besides the 25 per cent duties on steel, aluminum, and auto components.

Q. What are exceptions in the US tariffs?

A. Semiconductors, pharmaceuticals, and certain energy products are under the exemption category. Earlier this month, the Trump administration expanded this category by including smartphones, computers, and certain other electronics imported mainly from China.

Q. Why is the early tranche of BTA or full trade pact with the US important for India?

A. It will help protect India's exports to the US from potential American tariffs.

Q. What are ToRs in the India-US BTA?

A. These mainly include scope and objectives of the trade pact. According to sources, it would cover around 19 chapters such as tariffs, non-tariff barriers, goods, rules of origin and customs facilitation.

Q. How many meetings have happened so far on the agreement?

A. The BTA was announced during the visit of Prime Minister Narendra Modi to Washington, DC on February 13, 2025.

Commerce and Industry Minister Piyush Goyal visited Washington from March 4-6, during which he met his US counterparts -- US Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick.

Brendan Lynch, the Assistant US Trade Representative for South and Central Asia, was in India from March 25-29 for trade discussions with Indian officials. In that deliberation, they decided to virtually hold sectoral level engagements in the coming weeks. Now the Indian team is visiting the US.

Q. What are the key elements of the BTA?

A. The pact has aimed at more than doubling the bilateral trade in goods and services to USD 500 billion by 2030 from the current USD 191 billion.

While the US is looking at duty concessions in sectors like certain industrial goods, automobiles (electric vehicles particularly), wines, petrochemical products, dairy, and agriculture items such as apples, tree nuts, and alfalfa hay; India may look at duty cuts for labour-intensive sectors like apparels, textiles, gems and jewellery, leather, plastics, chemicals, oil seeds, shrimp, and horticulture products.

Q: What does the India-US joint statement issued on February 14 say about the BTA?

A. As $500 billion ambition requires new, fair-trade terms, the two sides announced plans to negotiate the first tranche of a mutually beneficial, multi-sector BTA by fall of 2025. The leaders committed to ensure that the trade relationship fully reflects the aspirations of the COMPACT (Catalysing Opportunities for Military Partnership, Accelerated Commerce and Technology).

To advance this innovative, wide-ranging BTA, the two will take an integrated approach to strengthen and deepen bilateral trade across the goods and services sector, and will work towards increasing market access, reducing tariff and non-tariff barriers, and deepening supply chain integration.

The US welcomed India's measures to lower tariffs on US products of interest in the areas of bourbon, motorcycles, ICT products and metals, as well as measures to enhance market access for US agricultural products, like alfalfa hay and duck meat, and medical devices.

Q. What is the meaning of deepening supply chain integration?

A. India and the US are looking to enhance collaboration in building resilient supply chains in areas such as critical minerals, semiconductors, and pharmaceuticals. It will help both sides diversify their supply chains and cut dependence on a few countries.