Even as India and the US engage in discussions as they make a beeline for the July 9 deadline to finalise a mini trade deal before the US imposes additional 26 per cent tariff besides the 10 per cent baseline tariff, key disagreements over US dairy and agricultural products remain a major bone of contention.
The Indian stock market has been rallying ahead of the trade deal deadline, as it maintains cautious optimism about an arrangement coming through, especially in the pharma, IT, textiles, auto parts, and electronics segments.
With US President Donald Trump announcing the likelihood of a trade deal announcement with India very soon, sources say the US is seeking a minimum of 60 per cent local value addition for products to qualify as ‘Made in India’ and receive benefits under the arrangement. Bloomberg News reported that India wants to negotiate this requirement to 35 per cent.
Meanwhile, the US continues to also press for concessions on dairy and agriculture, specifically genetically-modified variants of maize and soybean.
The deadline for a detailed BTA (Bilateral Trade Agreement) is this year’s fall.
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On Wednesday, Trump announced a trade deal breakthrough with Vietnam, saying Vietnamese exports to the US will face a 20 per cent tariff, while goods that are categorised as being transshipped through the country will incur a 40 per cent tariff. This pact will affect products containing Chinese components that are either minimally processed in Vietnam or routed through the country before reaching the US.
China, meanwhile, has issued warnings about protecting its interests as it navigates its own trade deal with the US, having reached a finalisation two weeks ago. The United Nations’ influence on other Asian countries can pose a significant challenge to Beijing, especially surrounding its acquisition of essential semiconductor manufacturing equipment.
China’s Ministry of Commerce released a statement on Saturday, saying China “firmly opposes any party reaching a deal at the expense of Chinese interests in exchange for so-called tariff reductions”.
"If this happens, China will never accept it and will resolutely counter it to safeguard its legitimate rights and interests," it cautioned.
According to Bloomberg Economics, Vietnam's trade agreement could trigger retaliatory measures from China.
"Beijing has signalled its intention to address arrangements that undermined Chinese interests, and the acceptance of increased tariffs on products 'transshipped' through Vietnam could be considered such a case," Bloomberg's Rana Sajedi noted in a research analysis.
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