India, U.S. Race Against July 8 Deadline for Trade Deal to Avert 26% Tariffs

India is making frantic efforts to clinch a mini trade deal with the U.S. by July 8 to prevent 26 per cent reciprocal tariffs that would slam major exports. In Washington, Indian negotiators are negotiating on controversial matters like admittance of GM crops and cow milk in India. The U.S is demanding market access to electric cars, wines, and dairy whereas India wants to have a reprieve on labour-intensive sectors including textiles and seafood. In the event that the limit on June 30 expires without any deal or extension, then U.S. tariffs will be charged starting July 9. Negotiations are made after President Trump mentions a major trade dealing with India.

Context

• An interlude on U.S. tariffs on Indian imports is due to end July 8 and the negotiations could end in a high-stakes trade meeting in Washington. 
• As U.S. elections approach both countries are seeking a swift and politically sustainable deal as trade tensions between the two countries have stretched over a period of time.

Highlights of the India and U.S. Trade Negotiations

Deadline Pressure:

• On July 9, the U.S. will start collecting a 26% reciprocal tariff on Indian exports unless no agreement is signed.
• The deadline of July 8 is the expiration date of a 90-day pause on tariffs on goods imposed by the U.S. on what was declared by the U.S as the Liberation Day.

Contentious Issues:

• U.S. demands:
  • The genetic harvest of the genetically modified (GM) crops and cow milk, which is not opened to the market in India.
  • Tariffs on industrial products, electric cars, wine, petrochemicals and milk products are reduced.
• India’s stance:
  • They are very much against GM crops and foreign dairy to safeguard local farmers.
  • In the other FTAs, India has never opened the market to GM crops or importation of cow milk.

India’s Demands:

• Relief of higher U.S tariffs on steel and aluminium.
• Access to market of labour intensive products like:
• Exports textiles, gems, jewellery and leather products
• Plastics, chemicals, shrimp, grapes, oil seeds and bananas.

Political and Economic Interests:

• President Trump dropped hints that the U.S. was going to have a very big trade deal with India.
• In the case of India, the main aim should be to avert increases in tariffs and safeguard exports before international economic shocks.
• It is likely that a trade deal will be small (mini-deal) and of symbolic value to bilateral relationships.

Conclusion

The current negotiations being done between India and U.S trade are essential in preventing hefty tariffs which will only deteriorate the export economy of India. On the one hand, both countries pursue win-win conditions, yet some hot-spot areas are pending such as GM food imports and dairy products. An effective deal may become a milestone in India U.S trade relations but thanks to the deadline, the diplomatic clock is expiring.